PART A
Your line manager, Ahmed, has sent you the following email late on Wednesday just as you are about to finalise your timesheet and head to a monthly tax-update webinar:
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From: Ahmed Sent: Wednesday, 16 September 2020, 3:58PM Subject: URGENT: Lisa Eastwood meeting scheduled, task assigned Good afternoon, I have just spoken with Lisa Eastwood (new client) over her tax position for the current tax year. I will be getting further documentation tomorrow; however, I need you to examine my notes below and determine the tax consequences arising from her various activities. Lisa has recently moved to Melbourne from Darwin, after being appointed as Regional Manager at the company, Dial Before You Dig. Lisa’s Darwin Home Lisa sold her home in Darwin (contract date September 2019, settlement December 2019), receiving $1,220,000 at settlement. This is after legal fees ($12,000), advertising ($2,000) and real estate commissions ($25,000) were deducted.
Sculpture Lisa gave a sculpture, valued at $18,900, to her friend in June 2020. The sculpture was purchased for $480 in December 2000 and repaired in March 2016 for $1,250. Vase When Lisa was playing with her cat in September 2019, the cat accidentally knocked over and broke a vase given to her by her grandmother in September 2018 (worth $6,100 at that time). The vase dated back to the Australian gold rush (circa 1850's) and, after undertaking some research, she discovered it was currently worth approximately $27,000. Lisa did not have insurance for the item. Cryptocurrency Lisa converted cryptocurrency into $27,200 Australian dollars in October 2019. To complete the transaction, she incurred $950 in transaction fees. Therefore, Lisa received $26,250 in cash. Lisa had acquired the cryptocurrency in September 2018 for $9,200 Australian dollars. Shares Lisa sold shares she held in a construction company in March 2020 for $182,000. She had purchased the shares for $37,200 in December 1986. Lisa has indicated that she has carried forward losses from prior years of $180,000 relating to a prior disposal of shares and land. We will have a meeting first thing Monday morning, so please complete your analysis by the end of Friday so I can review her circumstances over the weekend. Regards, Ahmed. Senior Accountant M&M Tax Accountants |
Required: You are required to calculate Lisa’s Net Capital Gain (loss) for the year ending 30 June 2020 based on the above information provided. In doing so, you must present an accurate and complete analysis.
Question 4
A.4 Determine the taxable capital gain (loss) on the sale
of the Cryptocurrency. Briefly justify your answer/show all
workings
Part - A
For Current year Lisa has Net capital gain of 549,950 as per
below calculations. While calculating details loss has shown with minus sign and gain without sign.
House Property -
In house property calculation sale expenses has been deducted from
income and while purchasing expenses has been added in cost. Also
non capital cost has been deducted from rent income as it incurred
while earning rent. Net gain has been calculated basis sales amount
received minus purchase cost plus rental income.
Sculpture -
There is no clear information about whether sculpture has sold or
given as gift hence considered as loss while calculating capital
gain as per current value.
Vase -
As vase had broken and there is no insurance for it hence
considered as total loss as per current values of vase.
Cryptocurrency -
As per given details net gain calculated in cryptocurrency as sale
value minus transaction fess minus purchase value.
Shares
As per given details net gain calculated in shares basis sale value
minus transaction fess minus purchase value.
Total gain calculated basis sum of point number 1 to 5 as shown
in table.
Carried forward losses has been deducted from total capital gain to
arrive capital gain for the year.
All calculation has been shown in below table.
| Capital Gain/ Loss for Lisa | ||
| Gain/ Loss on House Property | ||
| Sales Values | 1,259,000.00 | |
| Expenses Incurred for sales property | 39,000.00 | Legal Fees, Advertising & Real Estate Commission |
| Net Received (A) | 1,220,000.00 | |
| Purchase Values | 653,000.00 | As per records |
| Expenses Incurred for purchase property | 8,000.00 | Legal fee, comm, advertisement |
| Total Purchase Cost (B) | 661,000.00 | Total of purchase values and expenses |
| Rent Received | 120,000.00 | As per records |
| Non Capital Cost | 65,000.00 | |
| Net Rental Income © | 55,000.00 | Non capital cost deducted from actual rent |
| Net Profit in Sales of House Property (1) | 614,000.00 | A-B+C |
| Sculpture | ||
| There is no clear information about whether sculpture has sold or given as gift hence considered as loss while calculating capital gain as per current value (2) | (18,900.00) | Current value of Sculpture |
| Vase | ||
| As no insurance and its broken considered it as total loss as per current valuation (3) | (27,000.00) | Current Value of Vase |
| Cryptocurrency | ||
| Sales values of Cryptocurrency | 27,200.00 | As per given details |
| Sales transaction fees | 950.00 | As per given details |
| Purchase value | 9,200.00 | As per given details |
| Net gain in Cryptocurrency (4) | 17,050.00 | Sale value minus purchase value and fees |
| Shares | ||
| Sale values of Shares | 182,000.00 | As per given details |
| Purchase Values of Shares | 37,200.00 | As per given details |
| Net gain in shares (5) | 144,800.00 | Sale value minus purchase value |
| Total Gain of Lisa (6) | 729,950.00 | Sum of point 1 to 5 |
| Carried forward losses from prior years (7) | (180,000.00) | As per given details |
| Capital Gain for the year | 549,950.00 | Sum of point 6 & 7 |
Question 4
A.4
For Cryptocurrency Lisa has net gain of 17,050 AUD. Below is required details.
| Cryptocurrency | ||
| Sales values of Cryptocurrency | 27,200.00 | As per given details |
| Sales transaction fees | 950.00 | As per given details |
| Purchase value | 9,200.00 | As per given details |
| Net gain in Cryptocurrency (4) | 17,050.00 | Sale value minus purchase value and fees |
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