Calculate the tax, Taxation

Assignment Help:

Sue, Scarlett and Sally are in a partnership together providing accounting services.  The partnership uses the cash basis to account for income tax.  Under the partnership agreement, Scarlett is to get a partner's salary of $60,000, and the balance of the net income is to be equally shared between all three partners.  Any franking credits are to be shared according to the partners' relative share of net income.

During the 2009/10 income year, the partnership had invoiced clients $645,000 (incl GST) for services rendered.  However, the partnership had only received $561,000 (incl GST) in cash as at 30 June 2010.  In addition, the three partners had also disposed of a block of land that they had acquired on 12 October 2004 - the sale of the land gave rise to a capital gain of $75,000.  The three partners were going to build office premises, but the location was found to be unsuitable.

Other receipts and expenditure items of the partnership were as follows:

Receipts

Interest income                                            $  12,000

Dividend income (franked to 70%)                    $  60,000

Expenditure

Rental expense                                              $  85,800 (incl GST)

Secretary salary                                            $  50,000

Scarlett's salary                                            $  60,000

Telephone expense                                        $    5,720 (incl GST)

Depreciation on office equipment                      $  10,000

Fringe benefits tax                                         $    4,800

Speeding ticket (penalty)                                $       900

Electricity expense                                         $    2,200 (incl GST)

Drawings - Sue                                              $  25,000

Drawings - Sally                                             $  30,000

Required:

(a) In relation to the above facts, discuss and calculate what the 'net income' of the partnership is for the 30 June 2010 income year.

(b) Calculate Sue, Scarlett and Sally's share of net income of the partnership.

(c) Calculate the tax payable by Scarlett for the 30 June 2010 income year, assuming that she has no private health insurance, no dependants and no other income. You are also advised that Scarlett has net capital losses carried forward of $5,000, plus net capital losses carried forward from collectables of $1,000.  

NOTE      Treatment of dividend income:-

Assessable income

Include the dividend in assessable income under s 44(1) ITAA36.  

Also, include the dividend gross up in assessable income under s 207-35:

Dividend amount x extent franked  x 30/70

Offsets

A franking credit (offset) under s 207-45 equal to the gross up will be available to share amongst the partners (in accordance with their partnership agreement in this case).


Related Discussions:- Calculate the tax

What is the tax savings from the special tax treatment?, If Daniel's margin...

If Daniel's marginal tax rate is 35 percent and he has $115,200 of other capital gains (taxed at 15 percent), what is the tax savings from the special tax treatment? Daniel is c

Advanced Tax, The Madison Restaurant was formed a S corporation at the end ...

The Madison Restaurant was formed a S corporation at the end of last year. Bob Buron, owns 60% of the stock, manages the restaurant. Ray Huges owns the remaining 40% of the stock

Capital gains tax, Joe Smyth further advises you on the following transacti...

Joe Smyth further advises you on the following transaction - work out the resultant capital gains tax consequences.  Then calculate Joe's net capital gain for the 2010/11 income

Sedimentary rocks, a.  Which type of ripple marks would you expect to see o...

a.  Which type of ripple marks would you expect to see on the bed of a river? Why? b.  Which type would you expect to find on the floor of a standing body of water? Why? c.

Study case of an exam of GST in new zealand, my level Master of the Paper G...

my level Master of the Paper GST ( law) I have an exam case I have already answered I need to revise the high level tutor ( 5000 words) Can you help me?

Service tax, there is significant difference between the average service ta...

there is significant difference between the average service tax collection per assessee in Pune zone and the average service tax collection per assessee in the country

Research, Assignment 1 (from chapter 1) Ahi Corporation is one of your clie...

Assignment 1 (from chapter 1) Ahi Corporation is one of your clients in Hawaii. The company had a good year last year and owes the IRS $100 million, due on March 15. There are no p

Which of the following entities may not use the cash method, Which of the f...

Which of the following entities may not use the cash method of accounting? A partnership with average annual gross receipts in excess of $5 million. A C corporation whose avera

Describe what is the incidence of tax, Tax incidence can be separated into-...

Tax incidence can be separated into- 1. Formal incidence: the party liable to the tax 2. Informal incidence: party, who really pays the tax The tax incidence is decided by t

Income tax, Marc and Michelle are married and earned salaries this year of ...

Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd