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 $180,000 relating to a prior disposal of shares and land. We will have a meeting first thing Monday morning, so please complete your analysis by the end of Friday so I can review her circumstances over the weekend. Regards, Ahmed. Senior Accountant M&M Tax Accountants |
Required: You are required to calculate Lisa’s Net Capital Gain (loss) for the year ending 30 June 2020 based on the above information provided. In doing so, you must present an accurate and complete analysis.
Question 2
A.2 Determine the taxable capital gain (loss) on the sale
of the Sculpture. Briefly justify your answer/show all workings. (1
Mark)
| 1. calculatation of Lisa’s Net Capital Gain (loss) for the year ending 30 June 2020 | |||
| Particulers | Notes | Amount (A$) | |
| Sale Consideratio from home in darvin | 1220000 | ||
| Less: Cost of purchase in 2002 | 661000 | ||
| (After adding legal fees and exp) | |||
| Less: Cost of iMprovement made in year 2010 | 0 | 1 | 559000 |
| Sale of Sculpture | 18900 | ||
| Less: Cost of Improvement | 1250 | ||
| Less: Cost | 480 | 2 | 17170 |
| Sale of Cryptocurrency | 26250 | ||
| (After Incurring transactio fees) | |||
| Less: Cost | 9200 | 17050 | |
| Sale of Shares | 182000 | ||
| Less: Cost | 37200 | 144800 | |
| Total capital gain | 738020 | ||
| Less: Carry forward capital loss from sale of share and land | 180000 | ||
| Net capital gain | 558020 |
| Note:-1 Non capital Cost of improment made in the year 2010, does not qualify for deduction from sale consideration. | |||||||||||
| Note:-2 Assuming that sculpture given by lisa at current market value | |||||||||||
| Note :-3 it is assumed that vase is not sold by her, therefore not taken into account while calculating the income. |
2. Capital gain of sale of Sculpture is A$17170/- (See calculation in Answer 1)
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