Required: Ignoring capital gains tax, discuss whether the following receipts constitute ordinary income:

• $12,000
• $1,500.

Samantha is a full-time IT employee. However, she likes to sing and one day would like to make her living from her singing abilities.

On weekends and evenings, she writes songs and records herself singing. Typically, she does this for 8-10 hours per week. Ordinarily, she uses her mobile phone and a tripod to record the videos but recently purchased professional studio recording equipment worth approximately $5,000. She uploads her recordings to YouTube, where she has a substantial following. Many of her songs are popular and have a few hundred thousand hits. She has earned $12,000 in the tax year due to such a high number of YouTube hits.

Samantha wishes to cash in on her growing popularity and so, capitalising on her fame, sells some of her old clothes and shoes on Ebay for $1,500 (substantially more than she would have received had she not been so famous).

Ignoring capital gains tax, discuss whether the following receipts constitute ordinary income:

• $12,000
• $1,500.

subject principles of income tax