Specialist Pty Ltd manufacture and sell two products, Product X and Y. An independent survey yielded the following information in relation to the companies trading stock on hand: Product/value 30 June 2019 30 June 2020 Product X – cost $60,000 $70,000 Product Y- cost $30,000 $20,000 Product X – market selling value $80,000 $60,000 Product Y- market selling value $60,000 $40,000 Product X – replacement price $70,000 $80,000 Product Y- replacement price $40,000 $30,000 In 2019 the company valued its entire closing stock for tax purposes at replacement price. 

Required: 

Assuming that purchases in 2020 came to $120,000 and sales proceeds amounted to $280,000, and the company had no other transactions, calculate the company’s taxable income for 2020, valuing trading stock so as to give the smallest possible taxable income. 

Show all calculations and cite relevant legislation and case law where appropriate to support your answer.