Due to COVID-19 impact, Watson Co becomes insolvent and placed into voluntary liquidation by its

directors. Dissolve liquidators have been appointed as the company liquidators. On the winding up of

the Watson Co, Dissolve liquidators have started distributions and Paul as ex-shareholder of Watson

Co received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant

to the provision of Income Tax Assessment Act 1963, section 47(1). This distribution to Paul was from

his $4,000 investment in the shares of Watson Co on 2nd February 2019.

Required:

With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the tax consequences

of the above scenario for Paul.