Hillary Is A Famous Mountain Climber

1582 WordsMay 3, 20177 Pages
A newspaper has approached Hillary (who is a famous mountain climber) with the offer of writing her life story for a sum of $ 10,000. Hillary has no prior experience in writing but still accepts the offer and subsequently completes the story on her own. She provides the story to the newspaper and its copyright to the newspaper for the previously agreed consideration. Besides, she sells the resultant manuscript of the story along with expedition photographs for a monetary consideration of $ 5,000 and $ 2,000 respectively. The primary issue in the question is to ascertain the tax treatment of the above mentioned payments in the hands of Hillary. Besides, it also needs to be discussed if the answer would alter if Hillary was driven by her…show more content…
As per the court, the above donations collected by the taxpayer shall be treated his assessable income in accordance with Section 6(5). It is because it was reasonable on any third party to expect that this income would be derived by performing these activities and hence the income was expected (Gupta, 2009). This understanding can be extended to Hillary’s case also as in this case even though Hillary may write the story for satisfaction of self but it would be expected on the part of any reasonable third party that her story would have commercial value due to the fame she has achieved owing to her profession. As a result, when she decides to sell this, these proceeds which she derives in the given case would be treated as income from personal exertion as these are expected payments to be derived from the given activity (Gilders et. al., 2016). As per the information provided, the parent has extended a loan to the tune of $ 40,000 to her son while the son promised to make a payment of $ 50,000 at the end of the tenure of five years. The parent expressed that she had no desire to earn any income from extending the loan and had expectations with regards to repayment of principal amount only. However, in actuality the son made the repayment of the principal after two years and voluntarily provided interest income of $ 4,000 calculated at the rate of 5% pa. The main issue is to

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