Exam 3: Assessable Incomeincome Tax

Which of the following constitute the assessable income of the taxpayer?

Raymond is a hotelier who also races his own horses and horses under lease and who devotes a substantial amount of his time to the activity of horse racing. He bets frequently and systematically using valuable racing information which he acquires from trainers and others and he also uses agents to place bets for him. Is Raymond likely to be assessable on any proceeds from his betting on horse races?

The taxpayer was the wife of a famous, now deceased, celebrity. She entered into an agreement with a TV station to sell her story. She was paid a lump sum after being interviewed and handing over a copy of the manuscript of her story. Is this lump sum payment likely to be an income or capital receipt?

Fergus leased seven goats and entered into an agreement with a management company to agist, breed from, and otherwise care for and manage the goats. The taxpayer intended, on his retirement, to buy a farm and raise goats for meat and milk purposes, so the seven goats were leased with the aim of building his herd. The taxpayer took a keen interest in the development of the herd, received monthly reports from the management company as to their progress and maintained a card index system for his leased goats and their offspring. Is Fergus carrying on a business?

Would profit made by a company on the sale of land, that was formed for the purpose of buying and selling land, be assessable?

Which of the following is most likely to be a form of statutory income?

Bohdan has had an interest in coins all his life and he is very passionate about it. Recently he has started buying and selling coins on a regular basis on the internet. He is keeping records but he estimates that to date he has made a small profit of $2,500 from selling 8 different coins over the last 6 months. His total purchases were $15,000 and his sales were $17,500. At the of the tax year he has stock with a cost value of $10,000 still on hand. He wants your advice as to whether he is carrying on business as a coin dealer/trader?

Which is a suitable definition of ordinary income?

Which of the following is not relevant to the application of the results test in section 87-18?

Eastfield Ltd operates various supermarkets in NSW. A few years ago Eastfield purchased some land hoping to use that land for one of its new supermarket stores. However, plans recently changed and the land in question was instead sold at a profit of $300,000. Is this $300,000 profit from selling land by Eastfield Ltd likely to be assessable as ordinary income?

Brodie is a plumber and he works only for MC Plumbers. Brodie works at an hourly rate and does not have his own equipment or tools and instead uses those supplied by MC Plumbers. Brodie is also not personally liable should there be any problems with the work he has completed. Brodie does not himself employ anyone and he uses one room in his home for his tax records. Is Brodie likely to satisfy the personal services income rules?

How is a lump sum payment for the loss of opportunity to earn income likely to be considered?

Which of the following transactions will the recipients be least likely have to include the receipts in their income?

Which of the following is not a type of statutory income?

The term "income according to ordinary concepts" is best defined as:

Which of the following is likely to be considered ordinary income?

David Emporium operates a chain of successful retail stores. In order to obtain some finance for its operations, the company entered into a loan agreement with a subsidiary company in which it loaned the subsidiary a substantial sum in return for a right to large interest payments. Three days later (as was always the plan) it assigned the right to these interest payments to a finance company in return for a lump sum payment. Is the profit made from the assignment of these interest payments likely to be ordinary income?

What is the taxpayer's ordinary income based on the following: Salary received of $75,000; rent received of $15,000; net capital gain of $5,000; return to work payments of $3,000 and compensation (for loss of wages) received of $9,000.

Roger is an electrician who provides his services to two different clients- Ace Electrical (70%) and Sparkies are us (30%). For both payers he is paid an hourly rate but he does supply his own tools and equipment and he has his own liability insurance. Is Roger likely to pass the personal services income rules?

Bobbi is an employee for a successful accounting firm and as part of her duties she is regularly required to travel interstate. Whilst her employer pays for this travel, Bobbi is able to use her own personal frequent flyer card and have the points accrued for each work trip added to her card. When Bobbi eventually converts these points into free flights (which cannot be exchanged for cash) would the value of these flights be treated as assessable income to Bobbi?