Question
Charles and Johanna Mortdecai were business partners in an art appreciation training business called Appraise the Masterpiece which operated under the SBE system. They owned
Charles and Johanna Mortdecai were business partners in an art appreciation training business called Appraise the Masterpiece which operated under the SBE system. They owned their business premises which they had bought in the previous year for $650,000. The building had cost $230,000 when it had been constructed in June 2009. Charles had a 60% partnership interest and Johanna had the remaining 40%. Their partnership books showed the following Income and expenses for the current year:
INCOME
Income from art classes. Some customers had private lessons for which they paid weekly but most customers paid in advance for a terms fees. At 30 June 2016 $150,000 in fees for term three which was to commence on 24 July 2016 had been received. Refunds were offered up to one week before the classes commenced. $968,000
Lease premium received from lessees who had leased a portion of the premises. $20,000
Rent from tenants $30,000
Insurance payout for loss of earnings from the business when the former building was damaged in a storm. $60,000
Interest received from Charles($3,000) and Johanna ($2,000) on their drawing $5,000
Dividend received from Bankwest $5,000 Franking Credits were $2,143
EXPENSES
General operating expenses. This included insurance, motor vehicle expenses, telephone and electricity expenses $200,000
Interest on capital to partners, $10,000 to Charles and $8,000 to Johanna $18,000
Interest paid to Charles, he lent the partnership $400,000 to assist with the purchase of the new building. $20,000
Repair to new studio to repair leaks in the bathrooms. The leaks were not obvious when the building was purchased last year but were discovered during the current year. $3,200
Repair to premises as a result of a tap left on in the bathroom which flooded part of the premises $5,100
Superannuation for staff $13,500
Superannuation for Charles $50,000
Superannuation for Johanna $50,000
Wages staff $150,000
Wages Charles $120,000
Wages Johanna $100,000
Tax Agents Fees $5.250
Legal fees in relation to advice on setting up a new business. $1,250
A motor vehicle was provided to one of the employees, a log book was maintained and the business use was determined to be 82% of the total expenses incurred for the motor vehicle $10,200
Depreciation Expense $7,670
The partnership incurred borrowing costs of $789 on 1 June PY when they took out a loan at Bankwest to purchase new equipment, the loan was for 3 years
QUESTION
a) Calculate the net income of the partnership
b) Calculate the taxable income by each partner
c) Calculate the net tax payable of each partner
d) Provide the legislative references from the Income Tax Assessment Act 1997 and 1936
This is not from a textbook its a Question...
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