Tax Pack Dumped Online Returns Encouraged â€Myassignmenthelp.Com

Question: Discuss About The Tax Pack Dumped Online Returns Encouraged? Answer: Introducation It can be seen in the given case that Eric has bought some assets since the last year and because the given case does not mention an appropriate time for holding of such assets, it can be presumed that the same has been held for less than a year. Whenever the sale consideration of a specific asset exceeds its cost base, the taxability of capital gain arises and since in the given case, the assets are presumed to be held for less than a year, indexation benefit shall not accrue upon Eric. Eric has bought the following assets in the last year. Firstly, he has acquired assets for his own use excluding collectibles. These assets consist of a home sound system with an acquisition cost of $12,000. Besides, based on the law, if the acquisition cost of personal use assets is less than $10,000, then taxability of capital gain does not incur. Secondly, Eric has bought few collectibles that are usually to address his own benefits and enjoyment. Such collectibles consist of an antique chair with an acquisition cost of $3000, painting with an acquisition cost of $9000, and an antique vase with an acquisition cost of $2000 respectively. Besides, based on the law, if the acquisition cost of such assets does not exceed $500, then taxability of capital gain does not incur upon the transaction. Lastly, Eric has also bought few shares in a listed company for an acquisition cost of $5000 that attracts capital gain tax according to the law (Sadiq et. al, 2017). Nonetheless, in order to compute taxability of capital gain for the assets held for less than a year, the acquisition cost of such assets can be deducted from their capital proceeds that can derive the net capital gain or loss for the year (Kobestky, 2005). (Amounts in dollars) Assets Acquisition cost of the assets Net Capital Proceeds Net Capital Gain or Loss Home Sound System 12,000 11000 (1000) Painting 9,000 1000 (8000) Antique Vase 2,000 3000 1000 Listed companys shares 5,000 20000 15000 Antique Chair 3,000 1000 (2000) Net Capital Gain 5000 Therefore, it can be seen from the above computation that the net capital gain in relation to Eric comes to $5000 and the same is liable to be paid by him respectively. In relation to the previously mentioned computation, many points must be taken into account. Firstly, every personal asset bought by Eric have been purchased at an acquisition cost of more than $10,000 and that is why they are applicable for taxability of capital gain. Secondly, the collectibles bought by Eric have also been bought for an acquisition cost of more than $500 and that is the reason why these are taken into account for computing net capital gain or loss for the year (Pratt Kulsrud, 2013). Lastly, the net capital gain of $5000 has been derived by setting off the capital losses from the capital gain in the particular year It can be seen from the given case that the employer of Brian has granted him an opportunity to avail a three-year loan amounting to $1 million at a special rate of interest that must be paid by him in monthly installments. This criterion is also popularly known as loan fringe benefits wherein an employer offers loan facility to his employee at a special rate of interest that is lesser than the statutory interest rates of the market (Renton, 2005). Further, since the statutory interest is not known in the given case, it can be presumed that the loan provided on April 1, 2016, with an interest rate of 5.65% shall be the statutory interest rate of the given loan. Moreover, to compute the taxability of such loan fringe benefit, various steps can be carried out. Firstly, the taxable value of such benefit can be computed by excluding the deductible rule. In relation to this, the actual interest rate of such loan must be subtracted from the statutory rate of interest on such loan. Therefore, the interest as per the actual rate of interest shall amount to $1000000 * 1% = $10000. Similarly, the interest as per the statutory rate of interest shall amount to $1000000 * 5.65% that is $56,500 respectively. Thus, the taxable value shall amount to $56,500 - $10,000 = $46,500 Secondly, Brian must calculate the loan interest as per the statutory interest rate after assuming that the same was payable in relation to the loan. Therefore, interest as per the statutory rate of interest shall amount to $10,00,000 * 5.65% = $56,500 Thirdly, it can be observed that around forty percent of the loan has been utilized for settling the future obligations and other purposes. Therefore, the imaginary amount of tax deductible interest expense must amount to $56,500 * 40% = $22,600 Fourthly, just like the previously mentioned step, the actual interest amount of the tax deductible interest expense must amount to $10,000 * 40% = $4000 Fifthly, the actual amount given in the fourth step shall be subtracted from the imaginary amount in the third step. Therefore, it gives $22,600 - $4000 = $18,600 Lastly, after computing all the above-mentioned requirements, the final taxable figure can be ascertained by subtracting $18,600 from $46,500 that gives $27,900 respectively. After evaluating the previously mentioned steps, it can be stated that if the interest was payable after termination of the loan in place of payment through monthly installment basis, then the deemed time of such loan would have been considered from the time when such interest became payable or would have been paid (Nethercott et. al, 2013). An agreement has been entered into between Jack and Jill for the purpose of renting a property, and they are liable to share the property as joint tenants with no other disputes. Further, Jill is entitled to 90% share of the profits in relation to the sale of property whereas Jack will be liable to the remaining amount. Besides, in the event of losses, every loss must be borne by Jack alone and Jill does not take any responsibility for the same. Nonetheless, in the given case, it can be observed that a loss of $10,000 had taken place and based on the agreement, Jack alone is responsible to bear the same. However, he has full right to set off such losses with his other income so that the net income or loss for the year can be determined. Similarly, if no gains have accrued to him, he can also carry forward such losses for the upcoming years (Kenny et. al, 2017). Therefore, if Jack and Jill sell the mentioned property in the given case, it is assured that either gain or loss may incur. In the case of profit from the sale of such property, the same must be borne by both the tenants in the ratio of 90:10 wherein Jill shall attain 90% of the profits and Jack shall attain the rest. Besides, Jack can also set off the loss of $10,000 that has accrued last year in contrast to the profits that may arise from the sale of such property. Moreover, if there is a loss, Jill will not participate in the same, and Jack shall take responsibili ty for the entire amount wherein he can set off the same with other income or carry forward it to subsequent years. On a whole, the net outcome is that Jack has the right to set off his past losses with the profits of the current period so that net income or loss can be determined. Similarly, if by selling the property, losses are incurred, Jack is entirely responsible for the same and he can utilize his right to set off or carry forward the same. Therefore, Jill cannot be affected by any tax treatment in the provided case It can be observed from the case of IRC v Duke of Westminster [1936] that an individual has full right to make use of legal methods in a manner that can allow him or her to minimize his total income or total tax payable as a whole. Besides, no superior authority has jurisdiction in restricting him from doing so. However, if lawful methods are not adopted to manage the accounts, then the authorities have complete jurisdiction to restrict the same and ask for an increased amount of tax payable by him (Fullerton et.al, 2017). Further, the prevalence of authenticated documents in relation to managing the books of accounts is sufficient to prove that the methods adopted for decreasing total tax are genuine in nature. Nonetheless, the given case has proved to be of utmost significance until the emergence of other case laws in relation to accounting and taxation policies. As a result, the perception of people regarding the previously mentioned case has become distinct in nature. In relation to the current situation, this case has been of significant importance because it plays a key role in preventing organizations from influencing relevant details from their books of accounts and allows them to proceed only with genuine means (Saunders, 2015). This can be illustrated through an example wherein a business X suffering from major losses owing to high debts in the business can make use of the case law to change its details in the balance sheet or write off its fixed assets to their carrying values. In simple words, the organization X can alter its financials if it is facing major losses and even if authenticated documents are not shown, the mere transaction of writing off fixed assets will be enough t o validate the same (Fullerton et. al, 2017). Furthermore, if such business attempts to make use of fraudulent methods to do the same, then the case law plays a vital role in preventing the same from happening. On a whole, if any transaction or event that can assist an organization in doing a business efficiently and in a lawful manner, then it is appropriate for the business and not immoral or illegal It can be seen from the given case that there are various pine trees in a land that is owned by Bill and in order to graze sheep in the land, Bill has no other option than to cut the trees. If he hires a logging company to the same, he shall receive $1000 for every 100 meters of timber provided to them. Since, the given case does not provide relevant information about the total amount of receipts attained by Bill from the logging company, the same can be regarded as a revenue receipt, and capital gain tax must not incur upon the same. Further, if Bill attains a lump sum amount of $50,000 for providing the right to such logging company for clearing out the timber trees from his land, the same receipt cannot be regarded as a revenue receipt. This is because it is a non-recurring receipt and is associated with a lump sum payment that is received only after giving the right to perform the required task (Barcokzy, 2010). Nonetheless, this receipt must be considered as a capital receipt and the same must be taxable under the heading capital gain tax for the year. On a whole, it can be seen in both the cases that Bill receiving some amount of money. However, the major difference in both the cases is that in the first case, it is a recurring receipt and is not a lump sum payment that has been received after provision of the right to perform the required task. In contrast to this, it can be witnessed in the second case that the lump sum amount of $50,000 is a non-recurring figure because, after removal of timber from the land, it will surely take some time to grow again. Therefore, since Bill has offered a right to the logging company for clearing the timber from the land, and in exchange, he has received a lump sum amount, the same cannot be considered as a revenue receipt and instead, it must be regarded as a capital receipt (Thorpe, 2012). This is because it is mainly associated with the selling of an asset to the logging company and hence, taxable under capital gains. Similarly, the first case shall be taxable under the normal rate of taxes. References Barcokzy, S 2010, Australian Tax Casebook, CCH Australia Ltd Fullerton, I.G, Deutsch, R, Friezer, M.L, Hanley,P Snape, T 2017, The Australian Tax Handbook Tax Return Edition 2017, Thomson Reuters: Australia Kenny, P, Blissenden, M, Villios, S 2016, Australian Tax 2017, Thomson Reuters: Australia Kobestky, M 2005, Income Tax: Text, Materials and Essential Cases, Sydney: The Federation Press Nethercott, L, Richardson, G Devos,K. 2013, Australian Taxation Study Manual, Sydney. Pratt, J. W Kulsrud, W N 2013, Federal Taxation, Oxford university press. Renton N.E 2005, Income Tax and Investment, 2nd edition, Sydney Sadiq, K, Coleman, C , Hanegbi, R, Jogarajan,S, Krever, R, Obst, R, Teoh, J Ting, A 2017, Principles of Taxation Law 2017, Law book Australia Saunders, C 2015, The Australian Constitution, Carlton: Constitutional Centenary Foundation Thorpe, C 2012, Tax Pack dumped online returns encouraged ABC News, viewed 14 September 2017 https://www.abc.net.au/news/2012-07-09/tax-pack-dumped-online-returns-encouraged/411778