Question
Question 3 Benjamin Crook is the proprietor of Collins Home Entertainment Centre. Its operations include the sale of discount electrical goods, short-term rental of professional
Question 3
Benjamin Crook is the proprietor of Collins Home Entertainment Centre. Its operations include the sale of discount electrical goods, short-term rental of professional video cameras and recorders as well as a wide range of video movies. The shop also stocks spare parts which are primarily used to service the rental equipment.
In March 2019, a truck crashed into Benjamin's business premises and helodged an insurance claim for compensation.
A breakdown of the amounts comprised in the claim is as follows:
Damaged Premises Electrical goods Hire equipment Rental movies Spare parts
Loss of profits from temporary closure of the business
$700,000 75,000 130,000 25,000 8,000
80,000 $1,018,000
After protracted negotiations he receives, and accepts, an offer from the insurancecompany of "$850,000 in full settlement of the claim". Noexplanation is given of how the settlement amount has been calculated.
(a) Benjamin Crook seeks your advice as to the assessability of the amount received.
(HINT: ReadWoellner, Chapters 6-800 to 6-910).
(b) What difference (if any) would it have made to your answer if he received
the full amount of the initial claim?
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