On 30 September 1996, Lucy bought an investment property in Mollymook (NSW) for $145,000. At the time of this purchase, she spent $300 on conveyancing fees and paid $2,300 on stamp duty.

Over the years, the property was always rented out and Lucy also incurred the following ownership expenses: Rates and land taxes totalling $4,325, plus landlord insurance which cost her $2,950.

Answer the following questions. You must show calculations and refer to law:

1. What is Lucys Cost Base for CGT purposes? (1 mark)
2. What is Lucys Reduced Cost Base for CGT purposes? (2 marks)
3. Calculate Lucys Net Capital Gain or Loss if she sold the property on 30 June 2020 for $500,000 (Do not use Indexing) (2 marks)
4. Calculate Lucys Net Capital Gain or Loss if she chose to use the Frozen Indexation Method and sold the property on 30 June 2020 for $500,000 (4 marks)
5. Which method should Lucy use to calculate her Net Capital Gain or Loss? Explain. (1 mark)