Based on taxation in accounting

Lisas Darwin Home

Lisa sold her home in Darwin (contract date September 2019, settlement December 2019), receiving $1,220,000 at settlement. This is after legal fees ($12,000), advertising ($2,000) and real estate commissions ($25,000) were deducted.

• Records indicate that Lisa purchased the property in 2002 (contract date January, settlement March) for $653,000. Legal fees, commissions and advertising of $8,000 were also incurred.
• Lisa moved in within 6 months, selling her former residence during that time.
• Over the ownership period, Lisa rented the property for three years beginning December 2010, with $65,000 of $120,000 in non-capital costs claimed against rental income. The property was valued at $890,000 at the time it began being rented.

Sculpture

Lisa gave a sculpture, valued at $18,900, to her friend in June 2020. The sculpture was purchased for $480 in December 2000 and repaired in March 2016 for $1,250.

Vase

When Lisa was playing with her cat in September 2019, the cat accidentally knocked over and broke a vase given to her by her grandmother in September 2018 (worth $6,100 at that time). The vase dated back to the Australian gold rush (circa 1850's) and, after undertaking some research, she discovered it was currently worth approximately $27,000. Lisa did not have insurance for the item.

Cryptocurrency

Lisa converted cryptocurrency into $27,200 Australian dollars in October 2019. To complete the transaction, she incurred $950 in transaction fees. Therefore, Lisa received $26,250 in cash. Lisa had acquired the cryptocurrency in September 2018 for $9,200 Australian dollars.

Shares

Lisa sold shares she held in a construction company in March 2020 for $182,000. She had purchased the shares for $37,200 in December 1986. Lisa has indicated that she has carried forward losses from prior years of $180,000 relating to prior disposal of shares and land.

Taxable capital gain for the home:

Full Value of consideration - $1220000 Less: Cost of acquisition - ($653000) Less: Legal fees, commissions and advertising expenses - ($8000) Taxable capital gains - $559000

Q1: The property was not rented for three years but now eight years. Re-assess the taxable capital gain (loss) on the sale of the home on the basis that Lisa rented the home for a period of eight years. Briefly justify your answer/show all workings.