Your client, Mave, is concerned about having a surpriseincome tax payable this year due to many asset sales and has come to you for some tax planning advice. She is independently wealthy and has sold some investments this year due to price increases that seem too good to be true. The information on her sales and purchases are provided below:
(a) BMW M3 G80 Manual for personal use that was purchased new on 12 November 2020 for $144,900. It seems that Covid restrictions have increased the value of the car due to reduced supply and she was made an offer she couldnt refuse of $160,000 therefore she sold the car on the 23 May 2021.
(b) Diamond necklace gifted to Mave on her 40th birthdayon 19 March 2011. The market value of the necklace when gifted was $30,000 and she has the item insured over the ownership period for a total of $3,800. On the 4 June 2021 she sold the necklace for $45,000.
(c) Painting purchased at auction on 19 March 1989 for $48,000 from a little-known artist she thought would become a big name. The painter is unknown now and she sold the painting for $5,000 at a garage sale on the 2 February 2021.
(d) Mave likes to go to the casino and normally loses but she had a good night and won $43,000 on the 26 August 2020 which she thinks she needs to include in her capital gains.
(e) Rental property air conditioning unit purchased on the 16 September 2019 that was upgraded this year was sold for $1,000 on the 22 February 2021.
(f) Vacant land acquired for $125,000 on her 13th birthdaywhich was the 19 March 1984 and the contract was signed on that date, the land didnt settle and transfer into her name until the 19 July 1984. She has incurred $44,400 in local council, water and sewerage rates and land taxes during the ownership period. The sale of the property was for $350,000 and the contract date was 31 January 2021 but settlement was delayed until 31 July 2021.
(g) Mave has many share holdings and sold quite a few recently:
a. On 1 March 2017 1,000 shares were purchased in Paylater Pty Ltd for $95 per share and $50brokerage was paid on the purchase. These were all sold on the 21 June 2021 for $131 per share and brokerage incurred on the sale was $75.
b. On 9 April 2020 50,000 shares were purchased in Paypush Pty Ltd for $1 per share and $75brokerage was paid on the purchase. These were all sold on the 16 October 2020 for $2.25 per share and brokerage incurred on the sale was $95.
c. On 31 August 2018 2,000 shares were purchased in Nil Pty Ltd for $51 per share and $160 brokerage was paid on the purchase. These were all sold on the 11 December 2020 for $141 per share and brokerage incurred on the sale was $225.
(h) Mave has a total of $68,000 in capital losses carried forward from prior tax years, $18,000 of which are related to a loss on sale of an antique clock which she sold in January 2019.
Required:
You are required to estimate Maves Capital Gains Tax (CGT) liability on each event. You are not required to calculate net capital gains or income tax liability.
a) Calculate each individual CGT event result using the steps provided to you in your training for CGT calculations. Describe and explain your decision-making process for each step of each event.
[10 marks]
b) Cite relevant legislation or case law to show your client you have a basis for your advice including all inclusions and exclusions with explanation of why.
