MLC301 ASSESSMENT 2 2020 FEEDBACK DOCUMENT

Answer Guide Question 1 Discuss briefly, citing sections, whether the following amounts are deductible for the taxpayer (1 mark each). (i) The taxpayer incurred an amount of $1,800 in borrowing charges when applying ...

Answer Guide Question 1 Discuss briefly, citing sections, whether the following amounts are deductible for the taxpayer (1 mark each). (i) The taxpayer incurred an amount of $1,800 in borrowing charges when applying for finance with WBank. (ii) The taxpayer paid his accountant $300 in fees. This amount was for the accountant preparing the taxpayer’s income tax return. (iii) The taxpayer is an employee at a law firm in town. He spends $40 getting a taxi to work as all public transport has been canceled that day and does not want to be late for a client meeting. (iv) The taxpayer is an accounting student and incurs $20 in taxi fares for travel between the supermarket where he works during the day as a cashier, and a the nightclub where he works selling drinks in the evening. Answer Guide (i) Yes deductible – s 25-25 borrowing expenses (ii) Yes deductible – s 25-5 tax-related expenses (iii) Not deductible – s 25-100(3) travel, as he travels from home no deduction (iv) Yes deductible – s 25-100 (2) as he produces assessable income at both Question 2 For the below two transactions for Eddie state for each of them, if any, the CGT event, timing of the event, the capital proceeds, the cost base, and whether Div 115 applies. Where appropriate support your answer with legislative authority (2 marks each) (i) Eddie runs a small mortgage broking firm and paid an amount of $40,000 as a premium to secure a lease in an office building in Burwood. This is in addition to both a bond paid and to the monthly rent. He paid the $40,000 and the first month of rent in January 2017. The lease expired in January 2020. Answer Guide (i) Note that the question says for Eddie. A lot of students answered this with an F1, but that is for the lessor (Eddie is lessee) so for him, it is a C2 event on ending. A lot answered F1 because they used the response from seminar practice question so make sure careful here.