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

Tax-exempt commercial paper, An unsecured short-term loan, generally issued...

An unsecured short-term loan, generally issued to finance short-term liabilities, which gives the debt holders (bondholders) some level of tax choice on the earnings from their deb

What is the difference between sales tax and vat, Sales tax, as compared to...

Sales tax, as compared to VAT is the percentage of revenue imposed on the retail sale of goods. Unlike VAT, sales tax is levied on the entire value of goods and services purchased.

Compute section 179 deduction and taxable income, Loni Company paid $ 527,0...

Loni Company paid $ 527,000 for tangible personalty in 2011 and elected to expense $ 500,000 of the cost (the limited dollar amount for 2011). Loni's taxable income before a Sectio

Calculate the change output growth , Utilize Okun's law to answer the quest...

Utilize Okun's law to answer the questions below;  u t  - u t-1  = -0.4(g yt  - 3%) Assuming u t-1  = 7% a. Calculate the change in u (u t  - u t-1 ) for each of the followin

Salary., introduction to income of salary

introduction to income of salary

Corporation taxation, A and B are unrelated individuals. A forms Newco Inc....

A and B are unrelated individuals. A forms Newco Inc. on January 2 of the current year by transferring property with a basis of $10,000 and a value of $50,000 for all 50 shares of

Provide a true tax argument, a. You are engineering a Leveraged-Buy-Out (LB...

a. You are engineering a Leveraged-Buy-Out (LBO) of ACME Industries, an industrial bottle maker. After the LBO, the firm will be financed with 90% debt and 10% equity. Fred Farber,

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

Introduction to Tax, To prepare Jackie O. Park''s tax return without the ai...

To prepare Jackie O. Park''s tax return without the aid of Tax preparation software, complete the following steps: Ensure that you have an Adobe Reader http://get.adobe.com/reade

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