THIS QUESTION REQUIRES AN ESSAY STYLE ANSWER

On 1st March 2001 Max bought an house in Shelly Beach which cost $250,000. In addition, he paid stamp duty of $15,000 and legal fees of $2,500 in that same month.

It was not his main residence. It was initially purchased as a holiday home for family and friends to use for the first year after purchase. The property was subsequently used for rental to produce income throughout the ownership period.

He used a loan of $250,000 to help him acquire the property and paid $1,500 stamp duty on the loan in November 2001. He paid annual council rates of $3,000 each year and Strata Corporate levies of $5,000 each year. He also paid interest on the loan over the ownership period totalling $115,000.

He also spent $25,000 on renovating the kitchen and $5,000 on installation of an air conditioning. However he was issued fine $550 by the Body Corporate for installing the air conditioning without obtaining prior approval.

The property was contracted for sale on 1st March 2022 for $1,200,000 and final settlement was on the 10th of May 2022.

Costs associated with the sale included commission of $25,000 paid to the real estate agent who sold the property, legal fees of $4,500 and advertising of $3,000. These sale costs were all paid on or before the day of the final settlement.

Required:

(a) Calculate the COST BASE of the property (4 marks)

(b) Calculate his NET ASSESSABLE CAPITAL GAIN (4 marks)

(c) He wants to know how his Net Capital Gain will be taxed. Explain the tax consequences and refer to law. (2 marks)

This question requires explanation of the legal principles involved as well as calculations.