Task: Anthony is aged 64 years old and has worked as a sole practitioner solicitor for the previous 36 years. He has a successful career and has collected a number of investments, but has not followed a particular strategy, tending largely to accumulate income producing investments without much planning. He is considering selling some of these investments and comes to you seeking advice regarding the taxation treatment of selling the following assets:

1. His own home in Sydney, which is a house that he purchased in 1984 for $175,000, which is now worth $1.25 million. No renovations or other improvements had been undertaken since the house was acquired. Anthony and his family have lived in this house continuously since it was acquired.

2. An investment property in Sydney that was acquired in 2000 for $350,000, which is now worth $700,000. This has been rented out continuously since acquisition. In 2002, Anthony undertook renovations that cost $60,000.

3. Shares in ABC Ltd, which were purchased in 2006 for $200,000 and are now worth $60,000.

4. Shares in XYZ Ltd, which were purchased in October 2016 for $100,000 and are now worth $210,000.

Anthony would like to sell all his shares immediately to fund a 3 month trip round the world to celebrate his retirement. His planned retirement date is in August 2017. Anthony has also been made an offer to sell his practice to another practice, Shark & Partners Lawfirm. As part of this offer, Anthony would be paid $300,000 not to practice law in Sydney for five years (assume that such an agreement is legally valid and would be binding)

Anthony also provides you with details of the following expenditure items:

5. Interest on a loan used to purchase the XYZ Shares. The loan was taken out on 1 September 2016, the loan funds were used exclusively to acquire the shares and the amount of interest was $7,000.

6. Establishment fee of $1,000 relating to the loan described in item 5 above.

7. Expenditure of $1,500 to his tax agent to prepare his income tax return and business activity statements for the previous year.

Undertake the following tasks in advising Anthony. Assume all events (unless otherwise explicitly noted) take place in the 2017/18 year of income.

A. Calculate the net capital gain (if any) that Anthony will need to include in his income tax return assuming he undertakes all proposed sales. (5 marks)

B. Write a Letter of Advice to Anthony, citing legislation and case law where relevant to address the following:

i. Advise Anthony of the tax treatment of the payment he would receive from Shark & Partners if he agrees not to practice in Sydney for five years. Do not consider any interaction with Part A. (5 marks)

ii. Advise Anthony of the tax treatment of the expenditures identified in items 5 to 7 above (5 marks). Demonstrate the ability to analyse the issues fully and discuss the application of taxation principles.

Rationale: This assessment task covers topics 1-5 and has been designed to ensure that you are progessing though the content at an appropriate level.

This assignment has been designed to assess your ability to:

• gather and integrate your knowledge on the topics covered thus far;

• investigate in depth the cases, rulings and legislation that are fundamental to taxation law;

• demonstrate your ability to apply that knowledge to a hypothetical, practical situation;

• exercise critical and reflective judgement;

• demonstrate your ability to conduct research using provided materials as well as other legal resources;

• develop your written skills; and

• demonstrate time management skills.Learning Outcomes:• be able to critically analyse the underlying concepts relevant to the treatment of financial products under the Australian income tax system;

• be able to assess the application of Australian taxation laws on financial products;

• be able to independently research and critically evaluate recent developments in taxation that are relevant to the financial services sector;

Students should be able to identify and apply legislation and case law to the issues identified as well as demonstrate the ability to analyse the issues fully and discuss the application of taxation principles.

Marking criteria

In assessing your assignment the marker will expect you to:

• present an assignment that is readable and coherent;

• use appropriate language, correct spelling and grammar;

• identify and analyse relevant issues;

• explain and apply relevant cases, rulings and legislation;

• reach a sound and well-reasoned conclusion;

• use appropriate referencing; and

• demonstrate time management skills.

Presentation: Style Guide: You response must be presented on using full sentences and paragraphs. Arial Size 12 font with 1.5 line spacing. Part B must be presented in formal business letter format.