QUESTION 1 INCOME RECEIPTS AND SPECIFIC DEDUCTIONS

Part 1 Examples of ordinary income, income from personal exertion A lawyer of many years had been involved with a family company and after the successful closing on the sales of the business was given $10,000 from the principal for the lawyers personal qualities. REQUIRED For the scenario above, consider whether the associated receipts are ordinary income under s 6-5 ITAA 1997, and state your reasons incorporating common law. Refer to the definition of section 6 income from personal exertion in ITAA 1936 in your answer and make comment about the relevance of its impact. (3 marks)

Part 2 Business income Other receipts A coin collector receives receipts from selling his coin collection. REQUIRED Business income must be derived and be convertible to money to constitute ordinary income. Although, most receipts from carrying on a business will be income, not every business receipt will be income. There must be a sufficient connection to the business activity. Spedley Securities For the above scenario consider whether the associated receipts are ordinary income pertaining to business under s 6-5 ITAA 1997, and state your reasons incorporating common law. (Ignore CGT consequences) (3 marks)

Part 3 Various Specific deductions - Gifts Jiao-Long made a donation of $300 to a compulsory Catholic school building fund. REQUIRED Consider the scenario above involving a gift and advise whether the expenditure is deductible. Assume the recipient is a deductible gift recipient. (3 marks)

Part 4 Various Specific deductions - Entertainment Christmas lunch and gifts provided to employees at a restaurant in comparison to sandwiches and coffee provided at the workplace as a morning tea. REQUIRED Assume the scenarios are broadly deductible under s 8-1, unless a forbidding provision prevents it under the negative part. Consider the two scenarios and whether they involve entertainment and advise whether the expenditure is deductible taking also into account the impact of Division 32 and FBT. (3 Marks)

Part 5 Various specific deductions - Trading Stock REQUIRED Give 3 examples of trading stock and advise why your examples are trading stock. Hint : you should be referring to the definition of trading stock, tax rulings, case law etc to assist your discussion (3 Marks)