Question 1)

A) Andrew and Piter are paterners, carrying on a business as a partnership. The partnership agreement provides that Andrew is to be paid an annual salary of $40,000. The balance is to be distributed equally between Andrew and Piter. The partnership agreement also provides that the partners are to share the losses equally in the case of losses. The partnership's assessable income for the income year is $100,000. Deductible expenses are $120,000.

Required:

What are the tax consequences for the partnership and each partner?

B) Benjamin is an artist. He sold some assets last week. He requests you to calculate the Capital Gain Tax (CGT) consequences of the following transactions:

He purchased the following items last eight months ago.

- an antique ceramic bowl (for $4,000),

- An antique vase (for $5,000),

- A colourful painting (for $15,000),

- A TV sound system for his personal use (for $10,000) and

- Shares of a reputed Company (for $6,000)

Last week he sold these assets as follows:

- an antique ceramic bowl (for $6,000),

- An antique vase (for $1,000),

- A colourful painting (for $ 5,000),

- A TV sound system for his personal use (for $9,000) and

- Shares of a reputed Company (for $26,000)

Based on the legal provisions, discuss capital gain tax assets and calculate his net capital gain or net capital loss for the current tax year

C) What is meant by two terms, 'tax evasion' and 'tax avoidance'? Give your answer with examples of each.