Baldrick Case Study - Loan Repayments - Taxation Assignment Help

Assignment Task :

SECTION A 
Baldrick bought an investment property on 1 July 2018 for $2,000,000. He rented out his property from 1 July 2018. He borrowed $1,800,000 on the same day from the bank to buy the property. The term of the loan was 8 years. The building was originally constructed in 2001 at a cost of $900,000. He received rent in cash from his tenants during the year ended 30 June 2019 in the amount of $93,000. Included in this amount was a payment of $9,000 on 30 June 2019 as rent for the month of July 2019. 
Baldrick incurred the following expenses during the year ended 30 June 2019 in relation to the property: 
• State Government Land Tax $22,500

• Loan Repayments ($52,000 principal and $130,000 interest) $182,000

• Real Estate Agent's fee to evict a tenant for non-payment of rent $2,300

• The front window was badly damaged at the time of acquisition and replaced on 4 July 2018 $2,800

• A new refrigerator was purchased on 1 March 2019 $3,800

• Loan application fee (paid on 1 July 2018) $2,000

• Legal costs for the loan to buy the property (paid on 1 July 2018) $2,600

• Legal costs for buying the property (paid on 1 July 2018) $4,600

• Stamp duty on the purchase of the property (paid on 1 July 2018) $95,000 
Baldrick wants to minimise his taxable income for this year. Assume all depreciating assets, if any, have an effective life of 6 years. He does not wish to use the SBE election. 
 

Required: Advise Baldrick as to what his taxable income or loss is for the year ended 30 June 2019. You must give reasons for your answer. Your discussion must include an analysis of the pertinent sections of the relevant legislation, rulings and the relevant case law. If relevant, you must show your calculations. 

Section A
Mrs Betty Blue runs a restaurant business in Sydney as a sole trader. Her net profit from the business is around $200,000 per year. She has no other income. Her husband, Barry, is not working because he is a house husband who looks after the family. Betty and Barry have three children, Peter (aged 15 at school with no income), Paul (aged 17 working full-time on $30,000 per year) and Mary (aged 19 at business college with no income). 
From your knowledge of the taxation of different entities discuss the advantages and disadvantages (purely from a tax perspective) of Betty switching from running her business as a sole trader to each of the following different structures: 
(a) Partnership

(b) Company

(c) Family Trust 
You must give reasons for your answer. Your discussion must include an analysis of the pertinent sections of the relevant legislation, rulings and the relevant case law. If relevant, you must show your calculations. 

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