924 case study Essay

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Case Study ACCG924 session 2 2014
a.)When Cut and Chop entered into a contract to sell the business premises on 1 May
2014, CGT event A1 occurred.(s104-10)
According to sec100-50, the net capital gain or net capital loss for the income year is calculated as follow:
Current year capital gain=capital proceeds-cost base or indexed cost base
In this case, the capital proceeds is 2.65 million (s116-20). Since the business premise is acquired on 1 June 2009 (after 21 September 1999) indexation method cannot be applied for calculating the cost base (Div 114). The cost base of the premise (s110-25) including purchase price (2.38million), incidental costs (s110-35) (legal fees $13500 and agents fees$45000).
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The income from renting the yacht for weddings, birthdays and promotion events for 60 times are assessable.
The advertising fee for placing advertisement in newspapers and magazines in Sydney is to generate assessable income, thus deductible (S8-1(1)). So as to the payment paid to agent to look after bookings and events.
Since the yacht is both for business and private use. The interest relating to the loan should be spilt into two parts. Mr. Parisi should divided the loan ($85,000) into home loan portion(private usage) and investment loan portion(business usage). The interest relating to the business portion is deductible (s8-1) while the interest relating to the home loan portion is not deductible(s8-1(2)).
Lastly, the expense for the 30 days cruise up the NSW/Queensland coast in the next year is totally private use, thus not deductible.(s8-1(2))

f.) When Mr. and Mrs. Parisi decide to relocate to Korea on 31 August 2014 to reside there indefinitely, CGT event I1 occurs.(s104-160(1)). They are deemed to have disposed of assets that are not taxable Australian property at their market value.
Their shares in the Cut and Chop are taxable Australian property (s855-25) and thus no deemed to dispose until they actually disposed of.
Capital gain or loss that happens to a dwelling that is a taxpayer’s main residence is generally ignored.(Div 118) So, Mr. and Mrs. Parisi can ignore any gain or loss related to
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