1. Hipolito purchased a hot water system for his investment property at the invoice price of...

1. Hipolito purchased a hot water system for his investment property at the invoice price of $5,900 on 11 September 2015. The costs of delivery and installation came to $450. The system was ready for use on 21 Sept 2015.The hot water system has a life of ten years. Calculate the amount of depreciation he can claim as a deduction from his income year 2015-16 using prime cost method (hint: The hot water system was used for 283 days for fiscal year 2015-16).

2. In July 2008, Chandra bought 800 shares at $3 per share. He incurred brokerage fees and stamp duty of $100. In December 2014, Chandra sold all 800 shares for $2.50 per share. He incurred brokerage fees of $75. Calculated the capital loss/gain he made from this transaction.

Expert Solution

Prime cost method of Depreciation

Cost of hot water system	5,900
Delivery & Installation	450
Total cost	6,350

Life in years	10
Depreciation each year	635

Since we are using Straight line depreciation method and the hot water system
is used for more than 180 days during the year full year's depreciation will be applicable.

Hence he can claim $ 635 as his tax deduction from income year 2015-16.


Calculation of capital gain / loss

Purchase price of shares for Chandra	3
No.of shares purchases	800
Cost of shares purchased	2,400
Brokerage and stamp duty	100
Total cost of purchase	2,500

Selling price per share	2.5
No. of shares to be sold	800
Cost of shares purchased sold	2,000
Brokerage cost	75
Total cost of sales	2,075

While computing capital gain / loss on sale of shares, borkerage and stamp duty
are not considered hence there is capital loss on sale of shares

Capital loss on sale of shares	-400

ekkarill92 answered 2 years ago

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