Question

Jill had made a capital loss of $1,000 in the 2017-2018 income year and had no capital transactions until now. Jill sells her holiday house on 1 January this year for $500,000. She bought the property on 1 January 2010. During her ownership period: she used the property as a holiday house for the first 2 years; then made it available for renting for the next 8 years. During these 8 years, the property was vacant for a total of 2 years. he has provided you with the following information: Description Date Amount Purchase of property 1 January 2010 $250,000 Deposit on signing of contract 1 January 2010 $50,000 Balance on settlement 11 March 2010 $450,000 Stamp duty on acquisition 11 March 2010 $5,000 Legal Fees on acquisition 11 March 2010 $1,000 Council rates p.a. 1 January each year $500 per year Real estate agent's commission on 1 January this year $2,000 sale Costs of advertising the sale 1 January this year $1,000 Calculate Jill's capital gain or capital loss for the year ended 30 June this year, using the CGT discount option. In your answer you must clearly identify the classification of the various amounts that form part of that calculation. Cite the relevant statutory provisions support vour calculation.

Answer 1

Solution:-

Jill had sold her property on 01st January 2018 for $ 500,000. She Bought this property on 01st January 2010 for $ 250000. She has paid commission on sales as well as incurred various expenditures including stamp duty, legal fees etc. at the time of purchase of the property.

We need to calculate the capital gain / capital loss for the year 2017-18 using CGT Discount Option.

Capital Gain = Net Sale Value - Cost of Acquisition

Calculation of Net Sale Value

Particulars	Amount ($)
Sales Value of the Property	$ 500,000
Less:- Real Estate Agent Commission	$ 2,000
Less:- Cost of Advertising the Sale	$ 1,000
Net Sale Value	$ 497,000

Calculation of Cost of Acquisition

Particulars	Amount ($)
Cost of Purchase of Property	$ 250,000
Add:- Stamp Duty	$ 5,000
Add:- Legal Fees on Acqusition	$ 1,000
Add:- Council Rates for the first year before registration	$ 500
Total Cost of Acqusition of Property	$ 256,500

Computation of Capital Gain / Loss on the Property

Particulars	Amount ($)
Net Sale Value of the Property	$ 497,000
Less:- Total Cost of Acquisition of the Property	$ 256,500
Capital Gain on the Sale of Property	$ 240,500
Less:- Other Capital Loss during the year	$ 1,000
Capital Gain for the year before deduction	$ 239,500
Deduction under CGT Discount Option allowable @ 50%	$ 119,750
Net Taxable Capital Gain	$ 119,750

CGT Discount Option Provision:- CGT operates by treating net capital gains as taxable income in the tax year in which an asset is sold or otherwise disposed of. If an asset is held for at least 1 year then any gain is first discounted by 50% for individual taxpayers\

Hence as per the CGT Discount Option Net Taxable Capital Gain works out to $ 119,750.