Question

In: Accounting

John is your client and has come to you to prepare his tax return. During the...

John is your client and has come to you to prepare his tax return. During the 2018-19 financial year, John disposed of the following assets:

(a) A two-storey residence at Stuart Park which he acquired in May 1991. In 1995 John vacated the premises to work in Japan for three years, during this period the property was rented. Other than the 3 year period, John has lived in the property as his residence. He paid $370,000 to purchase the property and received $840,000 on 27 June 2019, after the real estate agent deducted commissions of $10,000. (b) John acquired BHP shares on 15 July 2018 for $25,000. He sold those shares on 2 May 2019 for $40,000.

REQUIRED:

Calculate John’s Capital Gain, subject to Tax for the year ending 30 June 2019. Provide justification for your calculations using legislation and case law.

Solutions

Expert Solution

A Sale Value of the property on 27/06/2019                      840,000.00
Acquisition Value on May 1991                      370,000.00
Indexed cost of acquisition = Cost of acquisition * Cost Inflation Index (CII) of the year in which the asset is transferred / Cost inflation index (CII) of the year in which asset was first held by the seller or 2001-02 whichever is later
CII for 2018-19 280
CII for 2001-2002 100
Indexed cost of acquisition                  1,036,000.00
Long Term Capital Loss                      196,000.00
B 15/07/2018 Shares Bought @ 25000
02/05/2019 shares sold @ 40000
Short Term Capital Gain 15000
Tax on Short term capital gain @ of 15% 2250

ekkarill92 answered 2 years ago
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