CHAPTER 13 – SPECIFIC DEDUCTIONS

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Principles of Taxation Law 2018

CHAPTER 13 – SPECIFIC DEDUCTIONS

Question 13.1

Advise Cheryl of her tax consequences from the following transactions:

(a) Donation of $300 to the building fund of her local public primary school. (b) Donation of $50 to her local public library (as a result she does not need to pay membership

fees of $20 that year to borrow books from the library).

(c) Payment of $700 membership fees to the real estate agents’ association. Cheryl is a professional real estate agent but she has not been working as one for the last two years

following the birth of her child. However, she maintains her membership of the association

as she intends to go back to work one day.

Question 13.2

Digby owns a bookstore. He undertakes the following activities:

(a) replastering and repainting a wall which had been damaged due to a leak; (b) recarpeting the whole shop as the old carpet had worn out due to normal wear and tear; (c) installing a new payment counter with new display signs; and (d) repainting the front of the store with a new type of glossy paint to make it more attractive to

walk-in customers.

Advise Digby of his tax consequences arising from the above information.

Question 13.4

In Year 1, Beta Pty Ltd has $600,000 of assessable income and $1,000,000 of deductions. In Year 2,

Beta has $300,000 of exempt income, $200,000 of assessable income and $500,000 of deductions. In

Year 3, Beta has $500,000 of assessable income, $200,000 of exempt income and $200,000 of

deductions.

Advise Beta of its taxable income (or loss) in each year.