QUESTION 3 (25 marks) Kustom Kitchens Pty Ltd (Kustom Kitchens) is a resident private company that was incorporated in June 1993 to conduct the business of building kitchens and doing kitchen renovations It has two resident shareholders who are also its two directors, Bill and Ben Kustom The company owns the premises from which it operates Information for the year ended 30 June 2017 Sales of kitchen upgrades and complete kitchens amounted to $2,050,000 Council rates and land tax on the companys business premises amounted to $3,500 The company received a payment of $50,000 as part of an agreement to sell only one particular brand of electrical fittings Salaries paid to employees amounted to $500,000 Included in these salaries is an amount of $40,000 paid to Bills son The Commissioner of Taxation has determined that an amount of $30,000 is reasonable for the work done The company received a dividend of $20,000 from a resident private company that was 60 franked A $5,000 payment was made to a dependant of a retired employee A new computer system with a limited effective life of 4 years was purchased on 1 February 2015 at a cost of $15,000 A newly purchased sanding machine was defective and needed a replacement motor This replacement cost $4,000 The company paid $10,000 to be a sponsor of the local soccer club and have the companys name displayed prominently on the players uniforms Other amounts of $925,000 may be taken as deductible for the purposes of this question Required On the basis of the provided information, calculate Kustom Kitchens taxable income and tax payable for the year ending 30 June 2017 In your own words, write reasonably argued positions to support your tax treatment of all the tax issues raised herein Small business entity concessions must be ignored

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QUESTION 3 (25 marks) Kustom Kitchens Pty Ltd (Kustom Kitchens) is a resident private company that was incorporated in June 1993 to conduct the business

QUESTION 3 (25 marks)

Kustom Kitchens Pty Ltd (Kustom Kitchens) is a resident private company that was incorporated in June 1993 to conduct the business of building kitchens and doing kitchen renovations. It has two resident shareholders who are also its two directors, Bill and Ben Kustom. The company owns the premises from which it operates.

Information for the year ended 30 June 2017

Sales of kitchen upgrades and complete kitchens amounted to $2,050,000.
Council rates and land tax on the companys business premises amounted to $3,500.
The company received a payment of $50,000 as part of an agreement to sell only one particular brand of electrical fittings.
Salaries paid to employees amounted to $500,000. Included in these salaries is an amount of $40,000 paid to Bills son. The Commissioner of Taxation has determined that an amount of $30,000 is reasonable for the work done.
The company received a dividend of $20,000 from a resident private company that was 60% franked
A $5,000 payment was made to a dependant of a retired employee.
A new computer system with a limited effective life of 4 years was purchased on 1 February 2015 at a cost of $15,000.
A newly purchased sanding machine was defective and needed a replacement motor. This replacement cost $4,000.
The company paid $10,000 to be a sponsor of the local soccer club and have the companys name displayed prominently on the players uniforms.
Other amounts of $925,000 may be taken as deductible for the purposes of this question.

Required

On the basis of the provided information, calculate Kustom Kitchens taxable income and tax payable for the year ending 30 June 2017.

In your own words, write reasonably argued positions to support your tax treatment of all the tax issues raised herein.Small business entity concessions must be ignored.