Tutorial 6 Week 7 Tutorial Questions – Specific Deductions
Question 1
Advise Cheryl of her tax consequences from the following transactions:
| (a) (b) |
Donation of $300 to the building fund of her local public primary school. Donation of $50 to her local public library (as a result she does not need to pay membership fees of $20 that year to borrow books from the library). Payment of $700 membership fees to the real estate agents’ association. Cheryl is a professional real estate agent, but she has not been working as one for the last two years |
| (c) |
following the birth of her child. However, she maintains her membership of the association as
she intends to go back to work one day.
Question 2
Digby owns a bookstore. He undertakes the following activities:
(a) replastering and repainting a wall which had been damaged due to a leak;
| (b) (c) (d) |
recarpeting the whole shop as the old carpet had worn out due to normal wear and tear; installing a new payment counter with new display signs; and repainting the front of the store with a new type of glossy paint to make it more attractive to walk-in customers. |
Advise Digby of his tax consequences arising from the above information.
Question 3
Alina recently inherited a large block of land from her uncle. She built a house on the land and
subsequently sold the house and the land for $900,000. Alina received advice on the tax consequences
of the sale from her accountant, who is a registered tax agent. The accountant’s fees for the year were
$1,800. The fees related to the lodgment of Alina’s income tax return ($500) and the advice regarding
the sale ($1,300). Advise Alina as to whether the $1,800 paid to her accountant is deductible for
Question 4
In Year 1, Beta Pty Ltd has $600,000 of assessable income and $1,000,000 of deductions. In Year 2,
Beta has $300,000 of exempt income, $200,000 of assessable income and $500,000 of deductions. In
Year 3, Beta has $500,000 of assessable income, $200,000 of exempt income and $200,000 of
deductions.
Advise Beta of its taxable income (or loss) in each year.
Question 5
Big Shoes Pty Ltd sells shoes exclusively online. Customers are invoiced for the shoes when they are
shipped and are only required to pay for the shoes once they have been received and deemed
satisfactory. Big Shoes includes the invoice amount in its assessable income when the invoice is issued.
As of 30 June, Big Shoes determined that it had $10,000 in unpaid invoices. Its records indicated that
70% of the invoices related to shoes sold within the last month, which was considered acceptable.
However, of the remaining $3,000, $1,000 related to invoices which were more than three months
overdue. In accordance with its customary practice, Big Shoes wrote off the $1,000 of outstanding
invoices. Its standard practice is to issue payment reminders before writing off the debt and turning it
over to a debt collector. Big Shoes also created a provision for bad debts of $2,000 at this time.
Advise Big Shoes as to what amount (if any) it can deduct in relation to the unpaid invoices.
Question 6
Rumpole is a medical doctor and a scientist. He works at a local hospital in the mornings, attending to
patients. At lunchtime he takes a train to the local university where he works in a research laboratory.
At the end of the day, he takes the train home.
Advise Rumpole as to the tax deductibility of the train fares.