TAXATION LAW TRIMESTER 2, 2016 INDIVIDUAL ASSIGNMENT-

Question 1 - Your client is a parent who lent $40,000 to her son to provide a short-term housing loan. The agreement is that the son will repay $50,000 at the end of five years.

Reconsider this question in light of the following facts. The loan was made to the son without any formal agreement and without any security provided for the sum lent. In addition, the client (the mother) has informed you that she told her son that he need not pay interest. However, the son repaid the full amount after two years and included in his payment an additional amount which was equal to 5% pa on the amount borrowed. Only one cheque was presented for the total amount.

Requirement: Discuss the effect on the assessable income of the parent.

Question 2 - Scott is an accountant who purchased a vacant block of land in Brisbane on 1 October 1980. On 1 September 1986, Scott built a house on the land. At the time, the land was valued at $90,000 and the cost of construction was $60,000. The property has been rented out since construction was completed. On 1 March of the current tax year, Scott sold the property at auction for $800,000.

Requirement:

a) Based on the information above, determine Scott's net capital gain or net capital loss for the year ended 30 June of the current tax year.

b) How would your answer to (a) differ if Scott sold the property to his daughter for $200,000?

c) How would your answer to (a) differ if the owner of the property was a company instead of an individual?

1500 words, with at least 7 references.