MLC301 Principles of Income Tax Law - Assessment Questions

QUESTION 3. 8

Discuss the CGT implications of the following. Where the year is not mentioned, assume the current tax year. Alan entered into a contract to purchase a hardware shop on 23 April 1987 for $300 000. Solicitor’s fees and stamp duty payable on 10 May 1987 were $5000. Settlement took place on 18 June 1987. During June 2001, Alan spent $22 000 (including GST) in legal fees when the owners of the shop next door claimed that half of Alan’s shop was really theirs because it was partly build on their land.
Alan entered into a contract to sell the hardware shop on 14 February of the current tax year for $600 000 (excluding GST). Settlement was on 17 June. Does your answer depend on whether Alan is an individual running a business or whether he operates through a company? If so, why? If not, why not?