HA3042-Taxation Law

Quesiton 1

Sophia has visited her accountant, John and has provided him a listing of the transactions she has undertaken throughout the financial year to assist John in completing Sophia’s 2018 income tax return. The listing of the transactions is as follows: 

a) Sale of a block of land in Ninety Mile Beach for $800,000: Sophia purchased the land for $130,000 as an investment in 1991. She also paid $800 in stamp duty, $1,200 in legal fees. Before purchasing the land Sophia had to secure a bank loan and paid interest totalling $27,000. During the period of ownership her council rates, water rates and insurance totalled $18,500. In January 2008 a dispute occurred with a neighbour over the use of the land and legal fees incurred amounted to $8,000 in resolving this dispute. Before putting the property on the market $1,500 was spent to remove a number of large dangerous pine trees that were on the land. Advertising, legal fees and agent's fees on the sale of the land were $25,000.

b) Sale of Sophia’s shares in ABC Co for $32.20 per share. Sophia had 2000 share: Sophia paid 1% brokerage fee on the sale. She initially purchased the shares for $1.50 per share in 1983.

c) Sale of a stamp collection Sophia had purchased, from a private collector, in January 2018 for $33,000: she sold the collection at auction for $23,000. Auction fees totalled $3,000 for the sale.

d) Sale of a Bob Marley Guitar for $45,000: It was initially bought for $70,000 in 2003.  

Advise Sophia of the capital gains tax consequences of the above transactions. Ignore indexation. Your answer must include references to relevant tax law and or cases. 

Question 2

Ava visits his accountant David and asks him whether the following outgoings incurred by her are allowable deductions. Ava has recently completed her medical degree and taken up employment in Sunshine Hospital. Ava incurred the following outgoings: 

(a) Travel expenses to Sunshine Hospital for the job interview $320

(b) Ava moving expenses from her home in Darwin to relocate in Sunshine, Victoria $1800

(c) Payment of white’s uniform which are compulsory for doctors to wear at work $200

(d) Ava paid $18,200 childcare expenses for her two-year-old daughter.

(e) Ava made phone calls from her home phone to Sunshine Hospital after hours to check on patients this costs Ava $200

(f) When working evening shifts, Ava purchased $570 food from the hospital café bar.

(g) Ava received a $207 speeding fine when she was running late to Sunshine Hospital for an emergency visit. (h) Ava incurred $330 travel expense to and from work. 

Advise Ava of the deductibility of the above-mentioned transactions. Your answer must include references to relevant tax law and or cases.