Question 3: 54-15 Taxable Income is Assessable Income minus Deductions Using the rules in $ 70-35 and 6-5 ITAA97 we can conclude that the sales during the year of $190,000 will be included as assessable income under s 6-5. Deduction of 120,000 for purchases on hand under s 8-1 and 70-15. Closing value in the previous year will be opening value for this year ($70-40) ie $60,000. At the end of the year he can choose to close his stock using Cost, Market Value or Replacement Value (s 70-45). He choose to close using cost value. Thus the business has in increase value at the end of the year. The increase of $15,000 [ie $75,000 - $60,000] from the start value to the close value will be included as assessable income (s 70-35(2)). Taxable income would be $85,000