Lan has been dabbling in the blockchain space. Sinclair sees it as critical for the next generation of tax practitioners that you have a solid understanding of the tax implications arising from this space.

Client Number: 0023781

Client's Preferred Name: Lan

Client Meeting: 12 July 2022

In January 2022, Lan acquired $500 worth of 'Ether', the cryptocurrency used on the Ethereum blockchain. Lan immediately used half the Ether to purchase a non-fungible token (NFT), costing $255. The NFT represents a digital piece of artwork she has acquired for investment purposes as she has heard that they could become extremely valuable (or equally 'flop' or even be a scam). The remaining Ether is kept for investment also.

By early February, the NFT rose to $15,000 in value and Lan sold it for this amount. In doing so, Lan received $15,000 value in Ether, for which she then immediately converted back to Australian dollars. By the time she did so, the Ether value had increased slightly and she received $15,450 in Australian dollars into her bank account the same day.

Her friend, Levi, was interested in Blockchain as well. At the beginning of March, Lan 'airdropped' Levi a fifth of her remaining Ether. The value at the time of the transfer was $120.

In April, her wallet was hacked and she lost her remaining Ether, which was valued at $450. The police were not able to help her.

Lan has carried forward losses from a painting she had sold last year of $8,000. The painting had been hanging in her bedroom until she decided to upgrade her dcor.

Determine Lan's net capital gains for the year ended 30 June 2022 by answering the following questions.

1. Analyse each CGT event that occurs in respect to Lan's crypto-related activities. In doing so, ensure you detail all aspects of the event before coming to a determination of each respective taxable gain (loss)

2. Determine the net capital gains (loss) for Lan

3. Outline how your response in the prior question impacts Lan's taxable income