Theo purchased a truck for $67,000 to use in his business. The truck was purchased on 1 September 2017. The truck is used only for business purposes and Theo is not using the Small Business Entity method of depreciation. The effective life of the truck at the time of its acquisition was seven years. The accountant has advised that he should use the diminishing value method when calculating his depreciation claim.

Required A: (10 marks) Advise Theo how much he can claim for depreciation for the year ended 30 June 2018. In your response give reasons and refer to sections of legislation and cases, where relevant.

AND

On 1 July in the current income year, Cassie borrowed $100,000 and purchased a block of land for $120,000. Cassie intended to build a house suitable for herself, her partner and their children to live in. Soon after Cassie received an offer of $270,000 for the land. The sale, and settlement, took place in May of the same (current) income year. Cassies interest expense was $15,000. Assume there are no other costs associated with the purchase of the land.

Required B (10 marks) Advise Cassie whether there is a capital gain or loss as a result of the above transactions and the amount of that gain or loss, if any. In your response give reasons and refer to sections of legislation and cases, where relevant.