MLC301 Principles of Income Tax Law - Assessment Questions

QUESTION 3. 7

Calculate any capital gain/loss from the following transactions. Where the year is not mentioned, assume the current tax year. Frank entered into a contract to purchase a shoe store on 8 January 2000 for $200 000. Solicitor’s fees payable on 10 January 2000 were $5000. Settlement took place on 18 April 2000. A few years later, Frank decided to build an extension to the shoe store. The contract with the builder was signed on 5 August 2005. The cost of the extension was $250 000 and the building was completed on 18 December 2005. During January 2007, a severe hailstorm damaged some of the windows of the store. $5000 was spent on new windows which was fully deductible under s 25-10. Frank entered into a contract to sell the shoe store on 14 March of the current year, for $880 000 (including GST). Settlement was on 17 July of the following tax year.