TAXATION LAW
1. What is the purpose of s40-880 ITAA97? What types of expenditure are expressly excluded from the operation of the provision? Provide some examples of expenditure that would fall within the provision.
2. Felicity acquired 1,000 shares in J Co (a resident public company) for $12 each in March 2004. In January this year, J Co returned $8 of capital to its shareholders in respect of each share they held. The following month Felicity sold all her shares in X Co for $21 each. Requirements: A. Advise Felicity of the CGT implications of the sale. B. How would your answer be different if J Co had returned $14 of capital per share instead of $8?
3 Explain briefly whether the following receipts are assessable income. Include references to any relevant provisions in the ITAA1997 or ITAA1936. a) A car valued at $15,000 given as a prize to a depositor of a building society. The competition was open to all those who were able to maintain a minimum balance of $10,000 for the year. b) An exchange gain (not of an income character) of $1 million made by a large industrial company on repayment of long term loans. c) A travel allowance of $4,500 (paid at 45 cents per kilometre for 10,000 km travel) paid to an employee by an employer because the employee was carrying out tasks required by the employer.
4. Stephen is a professional water polo player. He engages Jamie, who is a sports agent, to negotiate a three-year playing contract with a water polo club. In return, Jamie is entitle to receive a commission of 1% of all salary, sponsorship money, appearance fees and endorsements that Stephen receives. Advise Stephen as to whether he would be entitled to a deduction for the payments to Jamie. Would you answer be different if Stephen simply paid a lump sum amount of $10,000 to Jamie?
5. Abdel (individual taxpayer) acquired 3,000 shares in Gippsland Ltd (a resident public company) for $9 each in August 2008. In October 2013 this year, Gippsland Ltd returned $4 of capital to its shareholders in respect of each share they held. Abdel sold all his shares in Gippsland for $8 each in February 2014. Requirements: A. Advise Abdel of the CGT implications of the return of share capital and later sale of shares. (7 marks) B. How would your answer be different if Gippsland Ltd had returned $9 of capital per share instead of $4? (3 marks)
6. Discuss the various tests developed by the courts for distinguishing between revenue and capital losses and outgoings.