MARKER’S COMMENTS

GRADE

Case Study ACCG924 session 2 2014
a.)When Cut and Chop entered into a contract to sell the business premises on 1 May
2014, CGT event A1 occurred.(s104-10)
According to sec100-50, the net capital gain or net capital loss for the income year is calculated as follow:
Current year capital gain=capital proceeds-cost base or indexed cost base
In this case, the capital proceeds is 2.65 million (s116-20). Since the business premise is acquired on 1 June 2009 (after 21 September 1999) indexation method cannot be applied for calculating the cost base (Div 114). The cost base of the premise (s110-25) including purchase price (2.38million), incidental costs (s110-35) (legal fees $13500 and agents fees$45000).
So, no CGT consequence occurs to the motor vehicle.

As to the antique collection, it should be Australian property and thus deemed to be disposed of at market value. However, under s118-10(1), if the collectibles were acquired for $500 or less, any capital gain or losses related to it will be disregarded.
Lastly, the yacht owned by Mr. Parisi should be regarded as not taxable Australian property, thus deemed to be disposed of at the market value.
Under s104-165(2), capital gain or loss from CGT event I1 can be ignored where an individual chooses, assets are then treated as taxable Australian property and then no consequences until actually disposed of. So, Mr. and Mrs. Parisi can choose to ignore the capital gain or loss until they actually disposed of them.

g.) If Mr. and Mrs. Parisi accept the offer of purchasing their shares in Cut and Chop on 1 September 2014, CGT event A1 occurs(s104-10). The capital proceeds is
100*$10,000=1,000,000(s116-20). The cost base of the share was
100*$1,000=100,000 when they acquired the 100 shares at the price of $1000 each on
1 June 2001(s110-25). They are individuals and acquired the Shares after 21
September 1999. And they had hold the CGT assets for more than 12 moths. So they can have 50% discount (Div 114)
The net capital gain in respect of selling their shares in Cut and Chop will be