Question

Mr. Leo Supreme owns a pizza restaurant. He is currently operating on a takeaway basis only. He has several employees working in the kitchen and delivering pizzas. He also owns various assets, including a rental property.

Luigi is Leo’s head chef and he is provided with the use of a Toyota RAV4 motor car as well as his salary of $100,000 per year. The car was purchased by Leo on 1 April 2018 for $55,000. Leo has not made the election under section 10 of the Fringe Benefits Tax Assessment Act. Luigi travelled 10,000 km in the car during the FBT year ended 31 March 2019 and, of this, 4,000 km were for business purposes. Luigi paid for the petrol for the car and this amounted to $900 for the FBT year ended 31 March 2019. Luigi was not reimbursed for the petrol.

Isabella is Leo’s store manager and she was given an interest free loan of $500,000 by Leo on 1 January 2019. Isabella used the loan for two purposes: 60% for the purchase of an investment property and 40% to pay off her home mortgage.

Leo purchased a rental property on 1 July 2018 for $1,200,000. To finance this purchase, he borrowed $1 million from Megabank at an interest rate of 5%. To arrange for the loan Leo paid a total of $4,000 for a loan application fee, a valuation fee, and legal fees on 1 July 2018. He also paid stamp duty of $52,000 and $3,200 in legal fees in connection with the purchase of the property.

In August 2018 Leo fixed the door to the rental property which was broken at the time of his purchase for a cost of $900. He also purchased new refrigerator for the rental property of $3,000 on 1 November 2018. The useful life of the refrigerator is 10 years. Leo replaced the entire roof of the rental property in October 2018 at a cost of $35,000 after it was severely damaged in a hailstorm in September 2018. He used substantially the same type of material that was there before.

On 10 June 2019 he sold the rental property for $1,500,000. The costs he incurred on the sale were $30,000 for real estate agent’s commission and $2,000 for advertising. With the proceeds of the property sale, Leo repaid his loan from Megabank on the date of sale.

Leo purchased some BHP Billiton Limited shares in May 1990 for $50,000 and then sold them in May 2019 for $100,000. He purchased an antique clock for $600 in June 2000 and sold it in June 2019 for $4,000. Leo also sold his Mercedes sports car in April 2019 for $60,000 which he purchased in April 2001 for $20,000.

Leo always wants to maximise his deductions. Assume that Leo can claim GST input tax credits for the provision of all fringe benefits he provides apart from the loan.

Question 2

What is Leo’s net capital gain or net capital loss for the year ended 30 June 2019?

Question 2

What is Leo’s net capital gain or net capital loss for the year ended 30 June 2019?

Question 2

What is Leo’s net capital gain or net capital loss for the year ended 30 June 2019?

Question 2

What is Leo’s net capital gain or net capital loss for the year ended 30 June 2019?

Question 2

What is Leo’s net capital gain or net capital loss for the year ended 30 June 2019?

Answer 1

WORKING NOTES FOR THE ANSWER :

1 .FBT Year ending is given as 31 st March 2019

2. Asked to clculate Leo's Capital Gain / Capital Loss for the Year ended 30th June 2019.s

3. Assets owned by Leo and Sold during the given period :

       Description            Date of             Date of Sale Cost Sales Price Sales Expenses        

                                     acquisition

1.   Car 1/4/2018    NA $ 55,000    NA NA

2. Rented propert    1/7/2018    10/6/2019          $ 1,200,000     $,1,500,000    $ 32,000

Additional cost incurred :

Loan Application etc      July 2018 $4,000                                              

Stamp duty etc    July 2018                                $ 55,200

Door                          August 18                                    $ 900

Refregeratore              1/11/2018                                    $,3000

Replacement of Roof   October 2018                           $ 35,000

3. BHP Shares    May 1990 May 2019    $ 50,000 $ 1,00,000    NA

4, Antique Clock June 2000    June 2019 $ 600 $ 4,000 NA

5. Mercedes Car    April 2001    April 2019    $20,000 $ 60,000 NA

6. FBT : Is the taxation of perquisites provided by the employer to his employee ,in addition to the cash salary or wages paid , is fringe benefit Tax . 49.25 % on all such payments.

7. Long Term and Short Term Capital gains : Generally if one hold the asset for more than ONE year before you dispose it , your Capital Gain or loss is LONG TERM, If you hold it One year or less it is Short Term. The rate of capital gains tax are either 0%,15 % or 20 % for most of the assets held for more than one year.

The rates for those assets whic are held for less than a year corresponds to ordinary income tax rates .( 10 %,12 %,22 %,24 %,32 %, 37 % ) .

8   Antiques purchased and sold are treated as Capital Gains and Taxed @28 %

9 So in the case of Leo the folloging sale of assets are Long Term abd Short term respectively .

1. Mercedes Car      Long Term capital Gain   ( Sales price _ WDV)

2. Antique Clock                                        Long Term capital gain         $ 1400

3 . Rented Property Short Term Capital Gain     $ 1,22,188

4 . Refregerator                                            Short term along with House.

5 . BHP Shares                                          Long Term                        $ 50,000

For the benze Car the depreciation @ 25 % and the WDV to be arrived.

SO SORRY FOR NOT COMPLETING IT FULLY.