Question

Your line manager, Ahmed, has sent you the following email late on Wednesday just as you are about to finalise your timesheet and head to a monthly tax-update webinar:

From: Ahmed

Sent: Wednesday, 16 September 2020, 3:58PM

Subject: URGENT: Lisa Eastwood meeting scheduled, task assigned

Good afternoon,

I have just spoken with Lisa Eastwood (new client) over her tax position for the current tax year. I will be getting further documentation tomorrow; however, I need you to examine my notes below and determine the tax consequences arising from her various activities. Lisa has recently moved to Melbourne from Darwin, after being appointed as Regional Manager at the company, Dial Before You Dig.

Lisa’s Darwin Home

Lisa sold her home in Darwin (contract date September 2019, settlement December 2019), receiving $1,220,000 at settlement. This is after legal fees ($12,000), advertising ($2,000) and real estate commissions ($25,000) were deducted.

Records indicate that Lisa purchased the property in 2002 (contract date January, settlement March) for $653,000. Legal fees, commissions and advertising of $8,000 were also incurred.
Lisa moved in within 6 months, selling her former residence during that time.
Over the ownership period, Lisa rented the property for three years beginning December 2010, with $65,000 of $120,000 in non-capital costs claimed against rental income. The property was valued at $890,000 at the time it began being rented.

Sculpture

Lisa gave a sculpture, valued at $18,900, to her friend in June 2020. The sculpture was purchased for $480 in December 2000 and repaired in March 2016 for $1,250.

Vase

When Lisa was playing with her cat in September 2019, the cat accidentally knocked over and broke a vase given to her by her grandmother in September 2018 (worth $6,100 at that time). The vase dated back to the Australian gold rush (circa 1850's) and, after undertaking some research, she discovered it was currently worth approximately $27,000. Lisa did not have insurance for the item.

Cryptocurrency

Lisa converted cryptocurrency into $27,200 Australian dollars in October 2019. To complete the transaction, she incurred $950 in transaction fees. Therefore, Lisa received $26,250 in cash. Lisa had acquired the cryptocurrency in September 2018 for $9,200 Australian dollars.

Shares

Lisa sold shares she held in a construction company in March 2020 for $182,000. She had purchased the shares for $37,200 in December 1986.

Lisa has indicated that she has carried forward losses from prior years of $180,000 relating to a prior disposal of shares and land.

We will have a meeting first thing Monday morning, so please complete your analysis by the end of Friday so I can review her circumstances over the weekend.

Regards,

Ahmed.

Senior Accountant

M&M Tax Accountants

Required: You are required to calculate Lisa’s Net Capital Gain (loss) for the year ending 30 June 2020 based on the above information provided. In doing so, you must present an accurate and complete analysis.

Please complete the following subset of SIX questions to complete this part.
1. Determine the taxable capital gain (loss) on the sale of the home, sclupture,vase,crypto and shares. Briefly justify your answer/show all workings.
2. Determine the Net Capital Gain and/or Loss for Lisa. Briefly justify your answer/show all workings

Answer 1

calculatation of Lisa’s Net Capital Gain (loss) for the year ending 30 June 2020
Particulers		Notes	Amount (A$)
Sale Consideratio from home in darvin	1220000
Less: Cost of purchase in 2002	661000
(After adding legal fees and exp)
Less: Cost of iMprovement made in year 2010	0	1	559000
Sale of Sculpture	18900
Less: Cost of Improvement	1250
Less: Cost	480	2	17170
Sale of Cryptocurrency	26250
(After Incurring transactio fees)
Less: Cost	9200		17050
Sale of Shares	182000
Less: Cost	37200		144800
Sale of Vase	27000
Less: Cost	6100	3	20900
Total capital gain		758920
Less: Carry forward capital loss from sale of share and land		180000
Net capital gain		578920

Note:-1 Non capital Cost of improment made in the year 2010, does not qualify for deduction from sale consideration.
Note:-2 Assuming that sculpture given by lisa at current market value
Note :-3 Cost to the previous owner will be taken as Cost.