1. 1)Zak Green, a recent engineering graduate has invented a new type of electric tricycle which he riding around the country, hoping to raise publicity for the invention and to attract investors. A wealthy philanthropist, Sir Rob Williams hears of Zak’s project and announces, “Zak is a fine a young man whom I hold in high esteem. No strings attached, I will pay him $1,000 a month until he can make a living from his invention.” Sir Rob pays Zak $12,000 in the 2019 income year. One evening Zak’s tricycle is badly damaged when he collides with a stray bull. His friend Yvette starts a Give A Little page to seek donations, and within three weeks, $5,000 has been given, which is enough for Zak to repair the tricycle, and continue his journey.

Required:

Explain if the $12,000 and $5,000 are income for Zak in terms of section CA 1(2) of the Income Tax Act 2007. (You should refer to relevant case law.)

2. 2)Ana Whero is the international marketing manager for Globex Ltd. Because Ana is required to travel so much for her work, her flat is empty for almost six months of the year. A friend suggests to Ana that, because her flat is in central Wellington, it would be an ideal place to rent to tourists. Ana tries advertising the flat for short-term leases on Airbnb, and receives a very positive response. She therefore decides to rent out the flat every time she is overseas on business. She engages a property management firm to manage the bookings. She also contracts a cleaning company to ensure the flat is perfectly clean after each visitor leaves. In the 2019 income year she earns $50,000 from rentals. Ana argues that this money is income from a business, as contemplated in section CB 1 of the Income Tax Act 2007 so that she can deduct expenses.

Required:

Explain whether the $50,000 is an amount derived from a business under section CB 1. (You should refer to relevant case law.)