Mary's Income Tax Case Summary

499 Words2 Pages
Issue: What are Mary’s income tax consequences of the transaction at 30/06/2013? Rules: Section 6-5(2) it has defined resident’s assessable income includes the ordinary income derived directly or indirectly from all sources whether in or out of Australia during the year of income. Section 15-15 “Profit-making undertaking or plan” which is defined to “Brings into assessable income the profit from the carrying or carrying out of a profit making undertaking or plan”, (similar to Section 25A ITAA36). Taxation ruling TR 92/3 is defined the isolated transaction is generally assessable if the taxpayer has any intention or purpose entered into the transaction was to make a profit or gain or this transaction was made in the course of carrying…show more content…
Mere realization of an asset will be the best description for this transaction (Scottish Australian Mining Co Ltd v FCT (1950)), the profit was not assessable as proceeds was not ordinary income. However, according to The Taxation Ruling TR92/3 in this case, Mary does not show any intention or purpose in entering into this transaction to make a profit (FCT v Whitfords Beach Pty Ltd – 82 ATC 4031). Lastly, Mary has discussed with the local estate agent and decided to subdivide the balance of eight hectares into four subdivided lots. Finally she sold two lots by 30th June 2013 for $200,000. By doing this, we can be seen that this transaction is for commercial purpose, so the profit for selling two lots which is $400,000 is added to assessable income (FCT v Whitfords Beach Pty Ltd-82 ATC 403). Conclusion: In conclusion, the first transaction is not assessable income because it has been acquired before 20th September 1985. Due to Mary had merely realized its capital assets, so the second transaction is not assessable income as well. And under The Taxation Ruling TR92/3, the third transaction is assessable income by showing the action is for commercial

More about Mary's Income Tax Case Summary

Open Document