Term 1 Standard Examination 2013/Taxation Law and Practice A LAWS19033
Page 1 of 5
Instructions Sheet
1. Write all answers in the Examination Answer Booklet provided.
2. This examination is worth a total of 70 marks.
3. This paper consists of six questions. Marks are indicated accordingly.
4. Write your answer clearly use headings or subheadings to show which part of your answer refers to which question. Example: Question 2 (a).
Term 1 Standard Examination 2013
Taxation Law and Practice A LAWS19033
Page 2 of 5
TOTAL 70 MARKS
COMPULSORY QUESTIONS
Students are to answer ALL questions.
Question 1 10 Marks
Briefly explain the extent if any to which each of the following receipts would be assessable income exempt income non-assessable non-exempt income or a capital gain of an Australian resident taxpayer if derived in the current year of income:
In your answers refer as appropriate to the ITAA 1936 ITAA 1997 Tax Rulings and/or case law.
Required:
(a) An amount of $100 received from the local tennis club in recognition of your assistance with their club accounts. (2 marks)
(b) Receipt of an amount of $10000 from an insurance company to compensate for pain and suffering from a neck injury sustained in a car accident. (2 marks)
(c) Sale of a lounge suite for $800. The lounge suite was purchased at a garage sale for $300 three months beforehand. (2 marks)
(d) The following figures relate to the trading stock of a retailer for the year ended 30 June 2013:
Opening stock (market value) $ 75000
Closing stock (market value) $ 89000 (2 marks)
(e) Jana commenced 3 months long service leave on 20 June 2013. She received a lump sum of $15000 representing her salary for the period of the long service leave on 2 July 2013. (2 marks)
Term 1 Standard Examination 2013
Taxation Law and Practice A LAWS19033
Page 3 of 5
Question 2 10 Marks
Briefly explain the extent if any to which each of the following payments made by an Australian resident taxpayer during the current year of income would be an allowable deduction:
In your answers refer as appropriate to the ITAA 1936 ITAA 1997 Tax Rulings and/or case law.
Required:
(a) An amount of $6000 paid to a solicitor to set up an incorporated company prior to starting business operations. (2 marks)
(b) The salary of a babysitter who is employed to look after the children of a businesswoman while she goes to work. (2 marks)
(c) The cost of veterinary expenses for a dog used as a guard dog by the owner of a used car yard. (2 marks)
(d) Jill works part-time at a dress shop while she completes a nursing degree. In July 2012 she incurs expenses of $700 to fly to Brisbane to attend a job interview with a major hospital. While she is there she attends a conference on Safety in Nursing at a cost of $400. A week after returning she finds out she has got the nursing job. (4 marks)
Question 3 15 Marks
(a) Discuss the tax implications of the following payments made by a partnership assuming that partnership income before the payments were made was $100000.
i. Salary of $10000 to one of the partners.
ii. Interest of $2000 paid on a loan to the partnership by one of the partners.
iii. Interest on $3000 paid on capital contributed by the partners.
(6 marks)
(b) Hannah and Rebecca run a business training horses. This business is run through a trading trust the Horse Star Trust.
The Horse Star Trust incurred a loss of $15000 in the 2011/12 income year as calculated in accordance with s95(1) ITAA 1936.
After conducting a major advertising campaign at the local racing track business picked up at Horse Star and in the 2012/13 income year the following items were recorded:
Profit from business activities