Question 1 DO ALL PARTS

All answers are to be supported by reference to legislation and /or case law where relevant.

For the 2015 tax year Bill completes the following transactions:

i. Sells an investment real estate property for $350,000 and incurred the following expenses: a. Legal fees of $1,500

b. Real Estate sales commission of $10,000

c. General advertising and selling costs of $800 ii. The above property was originally acquired in 2010 for $150,000 and at the time Bill incurred

the following expenses a. Legal fee $500 b. State Government stamp duty of $8,000

iii. The property was rented for the duration of ownership except for a period of 18 month in which time Bill completed a renovation on the property. The costs of the renovation were $50,000. During this same period the property incurred the following expenses:

a. Land tax of $2,500 b. Water and council rates of $3,500 c. Bank interest on loan of $9,500

Bills Tax Accountant advised that as the property had not been rented during this period the above expenses could not be claimed as deductions in Bills tax return.

iv. Bill completed two other transaction during the 2015 tax year. Bill sold another investment property that had been a bad investment decision. Bill had failed to complete a building inspection and subsequently found the property infected with termites. Bill sold the property having owned it for less than 12 months for a capital loss of $80,000. A friend of Bills informed him of a stock on the share market that had great potential. Subsequently Bill bought and sold shares in the stock over a six month period and made a capital gain of $100,000.

Based on the above facts, what capital gains tax events have occurred? Calculate the net capital gain or loss? Set out your answer outlining the steps involved and classify the cost base elements. Make reference to the tax legislation to support all parts of your answer. (Note: for the purposes of this question ignore any effect that deductions for the capital cost of the rental property under Div 43 might have on the cost base.)

[Total for question: 10 marks]