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

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%

What is the journal entry to record income taxes, Toggle's Fishing Fleet ha...

Toggle's Fishing Fleet had 20,000 shares of 5%, $20 par value preferred stock and 15,000 shares of $25 par value common stock outstanding throughout 2012. These data apply to each

Prepare a state tax return, David builds and maintains web applications for...

David builds and maintains web applications for a number of clients. He does a majority of his work from his home office, but he frequently drives to the client site to meet with h

Deductions, Roberta Santos, age 41, is single and lives at 120 Sanborne Ave...

Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield, IL 60781. Her Social Security number is 123-45-6789. Roberta has been divorced from her former husb

K- vat 2003, i want some problems with solutions on karnataka value added t...

i want some problems with solutions on karnataka value added tax 2003

.calculate the semi annual interest payments, 1. a company issues $10,000, ...

1. a company issues $10,000, 10%, 5 year bonds with semi annual payments principal amount, face value matuity value or par value: $10,000 stated or contract interest rate: 10% (per

Salary., introduction to income of salary

introduction to income of salary

Week 5 Problem Set, 83. Dawn Taylor is currently employed by the state Cham...

83. Dawn Taylor is currently employed by the state Chamber of Commerce. While she enjoys the relatively short workweeks, she eventually would like to work for herself rather than f

The tax rate of wyoming coal company , Wyoming Coal Company is interested i...

Wyoming Coal Company is interested in buying a machine for $40,000, which it will depreciate uniformly over a four-year period. An analysis of the life expectancy of such machines

DEPRECIATION, In April 2016, Reiko purchased and placed a rental house in s...

In April 2016, Reiko purchased and placed a rental house in service. She paid $184,000, including $27,000 for the land. Compute her 2016 depreciation on the rental.

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