Question
Consider the following scenarios: a) Leanne is a waitress. She receives hourly wages paid in cash. She also receives tips from customers. b) Albert is
Consider the following scenarios: a) Leanne is a waitress. She receives hourly wages paid in cash. She also receives tips from customers. b) Albert is a student who lives in a rented house in Melbourne with several other students. He receives a weekly living allowance of $300 from his parents, and in return he is expected to help with occasional lawn-mowing and general maintenance jobs at his parent's home. c) Bernadette receives $200 per week working as a full time nanny (child minder). The family she works for also provide her with a bedroom and food each week, and recently took her on a family ski holiday to Colorado (with all expenses paid by the family). d) Diana owns a floristry business in Carlton. She also owns the shop from which she runs the business. She currently receives about $2,000 a week from flower sales, whilst her expenses are about $800 per week. A chain-store has offered to buy her flower business for $10,000 and also pay her $1,000 per week for use of the shop. e) Robert receives $100,000 as the proceeds from selling the copyright to a book. Robert is an employee accountant who wrote a novel in his spare time over a number of years. f) Karen receives $1,000,000 as the proceeds from selling the copyright to a book. Karen is a well-known romantic novelist and is in the business of writing books and selling her copyright. Questions: Referring to relevant law, answer the following questions: (a) What are the prerequisites that a gain has to meet to be ordinary income? (b) What are the characteristics of ordinary income? (c) Discuss whether the above receipts are likely to be "ordinary income" under general concepts and assessable under section 6-5 of the ITAA 1997. (d) When is it appropriate to consider the application of section 15-2 of the ITAA 1997.
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