Question

Rose has a garage sale at her home, and on 5 May 2019 sold the following items. For which of the following transactions would she be liable for capital gains tax?

(i) Sale of a HD television for $2,000, given to her by a friend for nothing in November 2018.

(ii) Sale of a 2011 Kawasaki motor cycle for $18,000, acquired for $10,500 in 2014.

(iii) Sale of a piece of jewellery for $2,900 given to her by her mother in 1981 and valued at $600.

(iv) Sale of a painting for $5,000. The painting was inherited from her late father who died on 20 June 2008. Her father purchased the painting for $400 in 1993.

Select one:

a. (i), (iii) and (iv)

b. (iii) and (iv)

c. (iii) only

d. (ii), (iii) and (iv)

Answer 1

Ans B) iii and iv

Explanation

Capital gain arises only on sale of capital assets. Personal effects are not considered as capital assets and gain arising on sale of personal effects are not capital gains

i) Sale of a HD television for $2,000, given to her by a friend for nothing in November 2018 - Television is a personal effect. It does not considered as an investment. Hence gain arising from sale of television is not capital gain.

ii)Sale of a 2011 Kawasaki motor cycle for $18,000, acquired for $10,500 in 2014 - Motorcycle used for personal use is also considered as personal effect. Hence no capital gain on this transaction.

iii) Sale of a piece of jewellery for $2,900 given to her by her ectsin 1981 and valued at $600 - Jewellery is specifically excluded from the definition of personal ef. Therefore sale of jewellery attracts capital gains tax.

iv) Sale of a painting for $5,000. The painting was inherited from her late father who died on 20 June 2008. Her father purchased the painting for $400 in 1993 - Paintings is also a specific exclusion to personal effects. Hence this transaction attracts capital gains tax