Revenue law

Some of the reference should be from the Core Tax Legislation & Study Guide by Stephen Barkoczy 15th Edition, Australian Taxation Law by Woellner 22nd Edition and Australian Taxation Law Cases by R Krever 2012.

PART A (10 Marks)
Jennifer was employed as a medical practitioner at a private hospital in Concord. After many years of hard work, she decided to sell the following assets and used the money she received to travel around Australia:-
1.    Yacht sold on 6 June 2012 for $5,000 which she had acquired on 7 October 1999 for $15,000.
2.    Unique collection of stamps sold on 15 June 2012 for $3,000 which she had acquired on 6 March 1989 for $495.
3.    BMW (motor vehicle) sold for $16,000 on 17 June 2012. Jennifer had acquired the car on her 50th birthday for $25,000 on 15 March 2008.
4.    2,000 shares in a publicly listed company for $50,000 sold on 19 June 2012. She had inherited the shares from her father on 16 July 1989 when they had a market value of $5 each. Her father had acquired the shares for $4 on 15 April 1987.
5.    Main residence in Strathfield sold for $900,000 (less $20,000 agent fees, legal costs and advertising) on 1 June 2012. Settlement was on 15 July 2012. Jennifer had originally bought the house on 10 February 1986 for $250,000 plus $10,000 in stamp duty and legal fees. She had always rented the bottom half of the house to tenants and lived in the top half of the house which represented 50% of the total area.
Required
Explain and calculate the net capital gain or loss for Jennifer in respect of the year ended 30 June 2012. Jennifer has carried forward capital losses as at 30 June 2011 of $10,000.
YOU MUST SHOW ALL WORKINGS WHERE NECESSARY AND PROVIDE EXPLANATIONS INCLUDING LEGISLATIVE REFERENCES.
PART B (5 marks)

James is currently employed by the Rebel Sport Retail Chain but also competes in Australia and internationally in marathon running competitions. James is aiming to make it into the Australian squad for the Beijing Olympics. Rebel Sport pays James an allowance of $500 a month on the condition that James wears a cap with the Rebel logo when he trains and competes and Nike provides James with running shoes as and when he needs them. James and Rebel Sport have agreed that if James needs leave to participate in competitions he will be entitled to leave without pay. During the year ended 30 June 2012 James won $100,000 as a result of his participation in various Australian and international marathons.

Required

Advise James on theassessability,under the ITAA 1936 and 1997, of the prize money received during 2012 and any other income tax issues that he should be aware of in relation to his marathon running activities.

PART C (5 marks)

Popup Ltd sells imported clothing by wholesale and holds ten valuable import quotas that allow it to import stock.  Popup wishes to restructure its business and for that purpose, sells two of its quotas at a profit.

Popup has a license to reproduce pictures of Disney characters on t-shirts and other types of clothing for a 10year period. Popup charges a fee (royalty) per reprint made by clients. To obtain additional funding Popup enters into an arrangement under which it assigns its rights to receive royalties with respect to the reprints to a finance company, Finances Ltd, for 10 years in return for a lump sum payment of $10 million.

Popup and Finances are not related. Finance’s agreement to take the assignment of unpaid royalties is on purely commercial grounds.

Required

Explain the income tax implications to Popup of the above-stated transactions making reference to case law and legislation where appropriate.

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