Reference no: EM13853758

INCOME TAXATION

TOPIC- TUTORIAL EXERCISES - CGT

1. Which of the following are assets for CGT purposes?

i)  Earth moving equipment held for sale by a dealer but which, from time to time, is let out for hire;

ii) A villa in Spain owned by an Australian resident;

iii) A bungalow in Queensland, owned by a non-resident;

iv) A suite of antique furniture consisting of dining table ($2,000), six chairs ($490 each), dresser ($4,500) and hall stand ($1,500);

v) A motor cycle used for private purposes;

vi) A motor vehicle supplied to an employee as a car benefit for FBT purposes;

vii) Shares and securities held by a bank

viii) A vintage Rolls Royce valued at $85,000.

2. On 31 March 2008, Steve received a guitar as a birthday present from his friend, Jimmy, a musical instrument retailer who purchased the guitar for $2,000. The guitar's retail value is $3,000.

(i) Advise both parties of the capital gains tax consequences of the gift.

(ii) Suppose that in June 2008, Steve pawned the instrument at a pawn broker's shop for $1,500. What capital gains consequences follow?

3. What different tax consequences follow on the sale of an ordinary asset, a personal- use asset and a collectable? [Former exam question (part)]

4.

i) What are the CGT consequences when no consideration is received upon the disposal of a CGT asset?

ii) What happens if consideration promised is subsequently not received?

iii) Why would gifts commonly not produce a capital gain/loss?

5.

(a) Jo purchased a rental property on 4 July 2009 and immediately rented it out. In the year 2009/10 she incurred the following expenses. What is the cost base of the asset?

Purchase price	450,000
Stamp duty	15,750
Legal fees to transfer title	1,700
Mortgage interest - 4/7/08 to 30/6/09	24,000
Borrowing expenses	2,700
Advertising for a tenant	500
Extension to kitchen	25,000
Council   rates	1,800

(b) Elle purchased and sold within the past 12 months [ie, during 2010/11] the following assets:

Item	Purchase price	Sale price
Diamond ring (private use only)	$  2,870	$  3,920
Set of golf clubs (private use only)	$10,300	$10,000
Trading stock	$54,000	$68,000
Depreciating assets (no private use)	$14,600	$17,500
Antique vase (private use only)	$  2,890	$  4,200

Elle has carry forward capital losses on collectables from last year of $2,000. What is Elle's net capital gain or loss for 2010/11?