BAC318 - Advise Anju of the Tax Implications of His Situation - Law Assignment Help

Assignment Task

Question 1
Anju ran a bakery selling bread and cakes in Preston. He has a shop front on the main street, and uses his back room of his rented house, also in Preston, as an office to complete his bookwork. He has a contract with the local schools and some small businesses in the area to supply bread and cakes to them. Recently he received $8,000 in compensation for a cancelled contract with a local school who found another baker. This contract was 75 per cent of his total business income.
Anju is increasingly concerned about the future of his business as his wife Catherine is about to have their first child and this loss of contract has come at a bad time.
When he spoke about his concerns to his friend, Jaspreet, he suggested he contact Top Bread, one of the competitor businesses. He had heard that they were looking for a manager for their business. Anju followed up and Top Bread was extremely interested in what Anju had to offer. A week later Top Bread offered Anju the position as manager. The offer included a sign on fee of $20,000, an annual salary of $120,000 and a mobile phone. After discussing the offer with Catherine, Anju accepted the offer. To thank Jaspreet, he gives him a month’s supply of bread and cakes. Anju sold the remaining stock by the time he closed the shop front.
Anju then sold the shop front. It sold at auction for a loss of $120,000, which was insufficient to discharge the borrowings he had raised to originally purchase the premises. Anju therefore continues to pay interest on the remaining $30,000 owed to the bank.

REQUIRED:
Advise Anju of the tax implications of his situation. Your answer should include references to appropriate legislation, case law and tax rulings.

Question 2
Meighan and Harry were living and working in Sydney. They decided on a ‘tree change’, sold their Sydney home and purchased a large country house on a 10-hectare block in central NSW near Orange. Meighan works part-time as a librarian and Allan as a locum dentist in Orange. Harry is popular with the elderly patients in the town and regularly is given home-made cakes and scones, along with his fee. On one occasion he treated a local wine maker’s dog for snake bite when the vet was unavailable and was given a dozen bottles of local Shiraz in appreciation. The wine had a retail value of $360.
Meighan and Harry enjoy gardening. They plan to establish a few hectares of grape vines and grow vegetables. They attend a continuing education course on organic farming and find in their second year of growing they have a surplus of produce. Meighan started making marmalade and relish using her mother’s recipes. Initially she gave them to neighbours at no charge but they became so popular that she opened a stall at the local Growers Market held on the second Sunday of every month. Harry sold some of the excess vegetables to a local supermarket and now regularly supplies three retailers with sweet potatoes and pumpkin. They don’t keep records as they never intended to make a profit but estimate that in a good month gross receipts could be $700 to $900.
The 10 hectare block that Meighan and Harry bought now seems to small for what they want to achieve. As the block can be subdivided and carved in to small blocks and sold to people wanting to build their own homes, Meighan and Harry engage the services of a surveyor, architect and engineer to assist in developing the land before selling. They also engage the services of the local real estate agent to help sell the lots. This takes place over a year and results in gross sales of $3.500,000.
 

Required:
(a) Advise Meighan and Harry of any income tax consequences of paragraph 1, above.
(b) Advise Meighan and Harry of any income tax implications arising in paragraphs 2 and 3 above.

This BAC318 - Law Assignment has been solved by our Law experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.