The City Sky Co is a property investment and development company. Recently the
company purchased a vacant piece of land south of Brisbane on which it is planning to
build 15 apartments to sell. The City Sky Co has engaged the services of the local lawyer,
Maurice Blackburn, to provide the legal services required for the development for $33,000.
Maurice Blackburn runs an established sole trader business and turns over revenue of
$300,000 per year.
Advise The City Sky Co of the input tax credit entitlements that they may be entitled to.
Assume that The City Sky Co is registered for GST purposes.
QUESTION 2 – (10 MARKS)
Emma has provided to you a listing of the transactions she has undertaken throughout the
financial year to assist you in completing her 2015 income tax return.
Sale of a block of land for $1,000,000: Emma purchased the land as an investment in
- The purchase price was $250,000, plus $5,000 in stamp duty, $10,000 in legal fees.
To fund the purchase, she took out a loan on which she paid interest totalling $32,000.
During the period of ownership her council rates, water rates and insurance totalled
$22,000. In January 2005 a dispute occurred with a neighbour over the use of the land and
legal fees incurred amounted to $5,000 in resolving this dispute. Before putting the property
on the market $27,500 was spent to remove a number of large dangerous pine trees that
were on the land. Advertising, legal fees and agent’s fees on the sale of the land were
$25,000.
Sale of Emma’s 1000 shares in Rio Tinto for $50.85 per share: Emma paid brokerage
fee of 2% on the sale. Emma initially purchased the shares for $3.5 per share in 1982.
Sale of a stamp collection Emma had purchased, from a private collector, in January
2015 for $60,000: Emma sold the collection at auction for $50,000. Auction fees totalled
$5,000 for the sale.
Sale of a grand piano for $30,000: It was initially bought for $80,000 in 2000.
HI6028 Taxation Theory, Practice and Law Individual Assignment T2.2019 5
Advise Emma of the capital gain tax (CGT) consequences of her transitions. Ignore
indexation. Your answer must include references to relevant tax law and or cases.
Sample Solution
