Partnerships (10 marks) Having sold their delicatessen in July 2003, Bob and Linda were keen to embark on a new business venture. As Bob previously had experience in managing an investment property, it was decided that he and Linda should purchase a block of 4 units in Plumpton that Bob had earlier inspected and thought was a great investment opportunity. The property was purchased in December 2004 with a bank loan of $250,000 at 7% interest, and a $50,000 loan from Bob who charged the partnership 10% interest pa. The property was registered jointly in the names of Bob and Linda, who agreed to share in the net profit from the partnership on the basis that Linda receives 75% and Bob 25% with any loss from the partnership borne solely by Bob. It was also agreed that Bob should receive a salary of $20,000 per year for managing the investment and attending to its repairs and maintenance

All four units are fully tenanted and each earns rent of $300 per week.

Required: Advise Bob and Linda of their respective tax liabilities arising from the above arrangement for income tax year ended 30 June 2010. Your advice must refer to tax legislation and relevant cases. Your answer must show relevant calculations