AdditionalPracticeQuestionsrelatedtotopicCGT PDF

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Additional Practice Questions related to topic CGT...

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Question 3.2 Con Metropoulis received a promotion and transferred to Sydney. Before moving, Con sold the following assets: Item Home Vacant Land Caravan Old etching Antique Sideboard

Purchase Price ($) 95,000 28,000 7,000 500 2,000

Sale Price ($) 135,000 30,000 5,500 8,000 1,800

All assets were purchased on 29 October 1985 and sold on 30 June in the current income year. What amount would be included in Con’s assessable income for the year of sale? Answer CGT Event A1: Disposal of CGT Asset (S104-10(1)) 1. Home: Other Assets (S108-5) Assume this is Con’s main residence. The asset is exempted from CGT since it falls under main residence exemption. (S118-110) 2. Vacant Land: Other Assets (S108-5) Purchased on 29/10/1985 and sold on 30/06/2016 (Held for > 12 months) Index Method (S110-36) Index Factor = 68.7/40.5 = 1.696 (S960-275(5)) Indexed Cost = 1.696 * 28,000 = $47,488 Capital Proceeds = 30,000 (S116-20) Indexed Cost = 47,488 Indexed Loss = $17,488 It also doesn’t fulfil the criteria of indexed costreduced cost, therefore index Loss is disregarded hence $0.

Discount Method (S115-15) Capital Proceeds = 30,000 (S116-20) Cost Base = 28,000 (S110-25) Nominal Gain = $2,000 Discount x50% Discount Gain = $1,000

Indexed Loss is chosen since it is the least capital. 3. Caravan: Personal Use Assets (S108-20(2)) The purchase price of caravan is $7,000 which is ≤$10,000, thus exempt from CGT (S11810(3)). 4. Old etching: Collectables (S108-10(2)) The purchase price of old etching is $500 which is ≤ $500, thus exempt from CGT (S11810(1)).

5. Antique Sideboard: Collectables (S108-10(2)) Purchased on 29/10/1985 and sold on 30/06/2016 (Held for > 12 months) Reduced Cost = 2,000 (S110-55) Capital Proceeds = 1,800 (S116-20) Capital Loss = $200

Collectables ($) Old etching (Exempt) Antique Sideboard: Loss = ($200)

Personal Use Assets ($) Caravan (Exempt)

Other Assets ($) Vacant Land: $0 Home (Exempt)

Total Gain = $0 Capital Loss = $200

Total Gain = $0

Total Gain = $0

Net Capital Gain (S102-5) = $0 + $0 + $0 = $0 Note: Collectables loss of $200 is brought forward to the next income year. (S108-10(4))

Question 3.30 On 1 January of the current income year a resident individual sold the following assets which were purchased on 31 July 1989. Asset Jewellery Car Vacant Land A Vacant Land B Stereo Television

Purchase Price ($) 550 20,000 70,000 40,000 3,000 1,000

Sale Price ($) 4,950 22,000 40,000* 70,000 8,000 750

*Sold to the taxpayer’s spouse. Market value of the land at that time was $55,000. Calculate the net capital gain. Show all calculations. Answer CGT Event A1: Disposal of CGT Asset (S104-10(1)) 1. Jewellery: Collectables (S108-10(2)) Purchased on 31/07/1989 and sold on 01/01/2017 (Held for > 12 months). Index Method (S110-36) Index Factor = 68.7/54.2 = 1.268 (S960-275(5)) Indexed Cost = 1.268* 550 = $698 Capital Proceeds = 4,950 (S116-20) Indexed Cost = 698 Indexed Gain = $4,252

Discount Method (S115-15) Capital Proceeds = 4,950 (S116-20) Cost Base = 550 (S110-25) Nominal Gain = $4,400 Discount x50% Discount Gain = $2,200

Discount gain is chosen since it is the least capital gain. 2. Car: Personal Use Asset (S108-20(2)) Car is exempted from CGT regime (S118-5) 3. Vacant Land A: Other Assets (S108-5) Purchased on 31/07/1989 and sold on 01/01/2017 (Held for > 12 months)

Reduced Cost = 70,000 (S110-55) Capital Proceeds = 55,000(Market Value Substitution S116-30) Capital Loss = $15,000

4. Vacant Land B: Other Assets (S108-5) Purchased on 31/07/1989 and sold on 01/01/2017 (Held for > 12 months) Index Method (S110-36) Index Factor = 68.7/54.2 = 1.268 (S960-275(5)) Indexed Cost = 1.268 * 40,000 = $50,720 Capital Proceeds = 70,000 (S116-20) Indexed Cost = 50,720 Indexed Gain = $19,280

Discount Method (S115-15) Capital Proceeds = 70,000 (S116-20) Cost Base = 40,000 (S110-25) Nominal Gain = $30,000 Discount x50% Discount Gain = $15,000

Discount Gain is chosen since it is the least capital. 5. Stereo: Personal Use Asset (S108-20(2)) The price of the stereo ($3,000) is ≤ $10,000, thus CGT exempt (S118-10(3)) 6. Television: Personal Use Asset (S108-20(2)) The price of the television ($1,000) is ≤ $10,000, thus CGT exempt (S118-10(3))

Collectables ($) Jewellery: Gain = $2,200

Personal Use Assets ($) Car (Exempt) Stereo (Exempt) Television (Exempt)

Other Assets ($) Vacant Land A Loss: $15,000 Vacant Land B Gain: $15,000 Offset: Index: (19,280 – 15,000) = $4,280 Discount: (70,000 – 40,000 – 15,000)/2 = $7,500 Index is chosen since least capital gain

Total Gain = $2,200

Total Gain = $0

Net Capital Gain (S102-5) = $2,200+ $0 + $4,280 = $6,480

Total Gain = $4,280...