Tax law Essay

Tax law Essay

Your client Helen wants to fund her business as a fashion designer, therefore she has sold some of the assets
as follows:
1- An antique impressionism painting Helen’€™s father bought in February 1985 for $4,000. Helen sold the
painting on 1 December 2018 for $12,000. (2.5 marks)
2- Helen sold her historical sculpture on 1 January 2018 for $6,000. She has purchased the piece on
December 1993 for $5,500. (2.5 marks)
3- An antique jewellery piece purchased in October 1987 for $14,000. Helen sold the antique jewellery
piece on 20 March 2018 for $13,000. (2.5 marks)
4- Helen sold a picture for $5,000 on 1 July 2018. Her mother purchased the picture in March 1987 for
$470. (2.5 marks)
Advise the Capital Gain Tax consequences of the above transactions.
Question 2 (5 marks)
Barbara is an economist researcher and commentator. The Eco Books Ltd offers her $13,000 for writing a book
about economics principles. Barbara has never written a book about economics principles, but accepts the
offer and writes the economics book called ‘Principles of Economics’. She assigns the book’s copyright for
$13,400 to The Eco Books Ltd. The book is published and she is paid. She also sells the book’s manuscript to
the Eco Books Ltd’s library for $4,350 plus several interview manuscripts she has collected while writing the
economics book for which she receives $3,200.
Discuss each of the above payments to Barbara separately and states if these are income from Barbara’s
personal exertion. (2.5 marks) Would your answer differ if Barbara wrote the Principles of Economics’ book
before signing a contract with The Eco Books Ltd in her spare time and only decided to sell it later? (2.5
marks) Support your answer by referring to relevant statutory and case law.
Question 3 (5 marks)
Patrick paid $52,000 to his son David to provide some assistance in his newly started business. They agreed
that David repay his father $58,000 at the end of five years. Patrick provided this loan to David without any
formal agreement or security deposit for the sum lent. Patrick told his son that he need not pay interest.
However, David repaid the full amount after two years through a cheque, which was included an additional
amount equal to 5% on the amount borrowed.
By referring to relevant statutory and case law, you need to discuss the effect of these arrangement on the
assessable income of Patrick. (5 marks)

Tax law Essay

Sample Solution

 

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