Tanya is a pharmacist. The following events, relating to herself and her son, occurred in the current tax year. Tanyas Rottweiler

Tanya owns a pharmacy retail store as a sole proprietor. Lately, there have been some thefts of restricted medications from the store. As a result, Tanya pays a professional dog trainer $5,000 to train her four-year-old Rottweiler to be a guard dog for the store. After the dog is trained, she regularly leaves it overnight in the store to guard it. Tanya is unsure whether this expense is capital or not (note: assume that the dog does not constitute livestock for tax purposes).

Nathan

Tanyas son, Nathan, is a junior pharmacist who works for Tanya as an employee. Nathan wanted to increase his income, so he sold illegally small amounts of restricted prescription medications. As a result, he had to appear in front of a government tribunal. As this was his first offence, he was allowed to keep his pharmacy license. However, he had to pay a $5,000 fine. Further, to maintain his license, he had to undertake 120 hours of community services (unpaid) at a regional drug rehabilitation centre. Nathan undertook this unpaid service work on Tuesday evenings. He would travel directly from his mothers pharmacy (where he worked Tuesdays) to the regional rehabilitation centre using rail travel. He would get a lift home from the centre from a friend for free. Total train fares from his mothers pharmacy to the rehabilitation centre for the tax year amounted to $1,000.

Tanyas Investment Property

Tanya owns an investment property that she has rented out for the last 10 years. The carpet in the bedrooms and living areas has become old and worn, and so she arranges to have it removed and to polish the wooden floorboards underneath. This cost her $4,000.

Tanyas Trading Stock

The following information is relevant for Tanyas pharmacy concerning its trading stock during the current tax year:

Purchases of facial cleanser and vitamins: $120,000.

Sales of facial cleanser and vitamins: $300,000.

Total closing stock value for facial cleanser and vitamins for end of year prior to the relevant tax year: $400,000 (in total).

Trading stock values at end of current tax year:

• Facial cleanser: cost of $100,000, replacement value $90,000, market selling value $200,000.
• Vitamins: cost of $200,000, replacement value of $220,000, market selling value $300,000.

Required: Discuss the tax implications for the following transactions.

1. The deductibility for Tanya regarding the costs of training her Rottweiler (6 marks).

2. The deductibility for Nathan for the fine and travel costs as general deductions (6 marks).
3. The deductibility for Tanya for the $4,000 spent on her investment property (3 marks).
4. The trading stock implications for the facial cleaner and vitamins on the assumptions that Tanya wishes to minimise the income tax liabilities for the business (3 marks).

Support your answers with case and legislative authority.