Question 3: 5 Marks John and Alice are in a partnership as retailers of electrical goods. The partnership records, exclusive of GST, for this income year disclose: Receipts ($): 300,000 Gross receipts from trading Payments ($): 100,000 Purchases of trading stocks 30,000 Partners' salaries (each) 2,000 Interest on cash advance made to the partnership by John 60,000 Salaries for employees and rent paid 2,000 Legal expenses in recovering bad debts Other details: John and Alice share partnership profits equally Trading stock on hand 1 July: $10,000 Trading stock on hand 30 June: $20,000 John's personal records disclose: Gambling winnings: $2,000 Net salary as a part-time instructor (excluding PAYG tax instalments of $2,000): $5,000. Subscription to professional journals: $500 John is a member of a private health fund. Calculate John's taxable income for the income year explaining your treatment of each item in this question. Answer: (1) Net income of the partnership: $ Assessable income: - sales: s 6-5 ITAA97 - excess of closing trading stock over opening stock: s 70-35 ITAA97 Deductions: - purchases of trading stock: s 8-1 ITAA97 - partners salaries: not deductible: Scott - interest on cash advance: s 8-1 ITAA97 - employee salaries & rent: s 8-1 ITAA97 - bad debt recovery expense: s 8-1 ITAA97 Net income of partnership The amount available for distribution is $--------------- (being, the net income of the partnership of $------------ less salary paid to John and Alice of $----------------). (2) Johns taxable income: $ Assessable income: - share of partnerships net income ($86,000 x 50%): s 92 ITAA36 - partners salary - interest on cash advance: s 6-5 ITAA97 - gambling win: not ordinary income - salary as part-time instructor: s 6-5 ITAA97 Deductions: - professional journals: s 8-1 ITAA97 Taxable income