On 3 August 1992 Peter bought a holiday home. The property cost $870,000. He consulted his accountant regarding the purchase and this advice cost him $2,500 in July 1992. In addition, he paid stamp duty of $37,000 in July 1992. Peter used a loan to acquire the property and paid $1,700 stamp duty on the loan in July 1992. The property was sold in October 2020 for $6,800,000. Costs associated with the sale included commission of $93,000 paid to the real estate agent who sold the property and advertising of $6,400. Both expenses were paid in October 2020. In December 1994 Davids next-door neighbour, Skinner, disputed the placement of the fence and considered that some of the land on Peters side of the fence was in fact his land. It cost Peter $54,000 in various fees and costs to prove that the fence was correctly placed. Skinner did not pay any of Peters costs. Peter incurred a fine of $8,000 imposed by the local council for illegally removing a tree. David also incurred the following expenses in relation to the above property:

Interest on the loan over the ownership period totalled $245,000,

Insurance costs over the period of ownership costing $78,000,

Roof on the second storey was repaired in 1999 at a cost of $45,000,

Rates and land tax of $56,000 were paid during ownership of the property,

Interest of $17,000 was paid since October 1996 when David obtained a personal loan to completely modernised the kitchen and bathrooms at a cost of $63,000.

Required:

a) Provide a brief study for Capital Gain Tax and its objectives.

b) Calculate Davids cost base for Capital Gains Tax purposes.

c) Advise David whether he is liable to pay any Capital Gain Tax and provide your reasons and relevant legislation and case law.

d) Which method is used to assess Davids Capital Gain Tax (provide your reasons)?