Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Business Law & Ethics Expert

Scenario: On 1 February 2010 Andy King bought a derelict freehold office building for Rs 3m.  Legal fees of Rs 250,000 were paid in respect of the purchase. Throughout 2010 Andy renovated the office building at a cost of Rs 1.8m, with the renovation being completed on 23 December 2010.  He immediately put the office building up for sale, and it was sold on 5 April 2011 for Rs 9.9m.  Legal fees and other expenses in connection with sale amounting to a total of Rs 150,000 were paid in April 2011.

Andy financed the transaction by bank loan of Rs 4.5m that was taken out on 1 February 2010 at an annual interest rate of 12%. The bank loan was repaid on 5 April 2011.

Andy is employed as accountant and his taxable income for 2011 (before taking in account of the office building transaction) is estimated to be around Rs 2.5m.

Although Andy bought the office building with a view to making a profit, he thinks that as an isolated transaction it must be treated as a capital gain rather than as a trade assessable to income tax.

Required:

problem1. In brief describe the criteria known as the “badges of trade” that are used when determining whether a transaction constitutes the carrying on of a trade. You aren’t expected to quote from decided cases.

problem2. Compute Andy’s additional 2011 tax liability in respect of the office building transaction if he is:

(i) Treated as carrying on a trade; or

(ii) Not treated as carrying on a trade.

You should ignore VAT.

problem3. Given that Andy’s exempt dividends and bank interest for 2011 would amount to a total of Rs 400,000, state with reasons whether he would be liable to solidarity income tax and, if so, evaluate the amount of solidarity income tax that he would have to pay.

Business Law & Ethics, Finance

  • Category:- Business Law & Ethics
  • Reference No.:- M96150

Have any Question? 


Related Questions in Business Law & Ethics

What kinds of countries tend to use economic embargoesdo

What kinds of countries tend to use economic embargoes? Do embargoes have a greater chance of succeeding if they are applied gradually rather than suddenly?

In the year 2100 there was a young man named jim who could

In the year 2100, there was a young man named Jim who could travel through time. This young man has had serious infractions with the juvenile justice system. He has decided to travel back through time to start his life o ...

Scenarionatalie will be one of the first in her family to

SCENARIO: Natalie will be one of the first in her family to earn a college degree. She is determined to earn her bachelor's degree in psychology and then possibly go on to a master's degree, or even a doctorate. However, ...

Must be new and original work need asap not previously

Must be new and original work. Need ASAP. Not previously giveN to other students. needs to be a recent criminal Case. Locate a recent criminal court case you find interesting. Provide a brief summary and properly cite th ...

Assignment 1 not all confessions are created equalin

Assignment 1: Not All Confessions Are Created Equal In criminal law, it is undisputed that the best information regarding a crime comes from interviews conducted by law enforcement. Moreover, usually, some of these inter ...

Fact pattern you are a paralegal in a maryland general

Fact pattern: You are a paralegal in a Maryland general practice law firm. The intake paralegal who screens new client phone calls has set up an appointment for a prospective client to meet with your supervisory attorney ...

The united states is considering adopting a regulation that

The United States is considering adopting a regulation that foreign apples can be imported only if they are grown and harvested using the same techniques that are used in the United States. These techniques are used in t ...

1 plea bargaining has become very controversial in many

1. Plea bargaining has become very controversial in many states, and some states have eliminated it as a part of the prosecution process. Is plea bargaining good or bad? 2. The news media can affect jury and court decisi ...

In your answer to this question use the numerical example

In your answer to this question, use the numerical example from the section on Ricardo's theory of comparative advantage. What is the effect on the pattern of trade predicted by the Ricardian analysis if the number of la ...

Research one of the following programssexual assault write

Research one of the following programs: Sexual Assault Write a 250-300 to -word report about your selected program that addresses the following: The type of family system in crisis the program was designed to help The mi ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate