Acc00132-2018-2: Case Study Requiring Assessment Answer

1IEBH

Taxation Case Study Assignment

Description: Case Study requiring preparation of workpapers, calculation of taxable income and income tax payable, preparation of an individual tax return, and a letter of advice. CLIENT INFORMATION

? Gross Payments $120,000

? Tax Withheld $32,032

• Registration & Insurance 1,672

• Fuel & Oil 6,240

• Lease payments 8,940

Your client uses a mobile phone for contacting clients when buying and selling houses. It was purchased in May 2017 for $1,029 and is used 80% for work purposes. In addition to this a monthly amount of $60 is paid by your client each month on a plan that includes calls, texts and internet use.

Your client also sold some shares that were inherited from their grandmother. The grandmother passed away on 31 August 2017 and the shares were transferred to your client on 17 November 2017. The 2,000 Qantas shares were originally acquired by the grandmother in July 2008 for $3.02 each. The value of these shares in August 2017 was $5.72 per share and the value in November 2017 was $5.84 per share. They were sold by your client in February 2018 for $5.22. Total brokerage of $20 was paid in relation to the sale of these shares.

Your client purchased a townhouse at Main Street, Beachville NSW 2478 during the year to rent out and earn income from. A contract was entered into to purchase the property on 12 February 2018 for $350,000 and settlement took place on 15 March 2018. Your client used the proceeds from the above sales of shares and personal savings to pay for the townhouse, but needed to borrow $200,000 for the remainder of the purchase price, stamp duty ($11,240) and legal costs ($1,050). In order to obtain the loan, your client paid borrowing expenses of $450 on 15 March 2018.

• Stove $1,200

• Carpet $3,300

• Water rates (paid 1 May 2018) $185

• Insurance (paid 1 April 2018) $1,340

? Costs of attending 5-day Real Estate Conference in Perth – your client’s

16-year-old daughter accompanied your client on this trip (accommodation $1,425, meals $1,250, taxis $180) $2,855

? Subscription to “Your Investment Property” magazine $100

? Cost of having a registered tax agent prepare 2017 income tax return $245

? Your client does not have any private health insurance.

? Your client’s date of birth is 12 February 1964 and is single but has a 16-year-old daughter.