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Capital Gains Tax Liability - Case Study Example

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I have been working in the Tax Services Division of DV Chartered Accountants for two years. It was brought to my attention that you needed some counsel on some rather important matters and I am here to now assist you. I took some notes regarding the meeting which I wish to share with you.
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Capital Gains Tax Liability
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Download file to see previous pages This is not only valuable because you singularly own the property, but also because that gives you added equity and financial credibility in addition to other benefits, such as the fact that being a homeowner brings with it many perks.
The capital gains that will be have to paid on the apartment is $150,000 since that is the money that was made off the sale. This number is computed by subtracting the original list price ($650,000) from the sale price ($800,000). Additionally, capital gains tax must be paid on the house. The main residence exemption may apply, but you as the client would have to ask a capital gains lawyer if this would apply to you. You were supposed to have given two years' notice within having a combination of residencies.1
Since Angelina owned 10,000 shares in Rio Tinto, and they are now valued at $40 and not the original selling price of $29, she will have to pay capital gains taxes for stock value. Her capital gains tax will be a certain percentage of $11,000 that she made after the BHP takeover of Rio Tinto. Rollover consequences may be that Angelina will have to pay some sort of fine for rolling over her assets.
For Angelina's partnership with Lena, she will have to pay a certain percentage of capital gains taxes of $75,000. ...
[However, w]hile the roll over allows you to defer a capital gain to a later income year, other CGT small business concessions may exempt or reduce your capital gain" which are the consequences.2
The law states, "If your business has owned an asset for 15years and you are aged 55years or over and are retiring, or if you are permanently incapacitated, you won't have an assessable capital gain when you sell the asset."3 Therefore, since Angelina is only 52 she cannot get this break.
However, the law also states, "A capital gain from the sale of a business asset will be exempt up to a lifetime limit of $500,000. If you are under 55years of age, the exempt amount must be paid into a complying superannuation fund or a retirement savings account to obtain the exemption."4 This would apply to Angelina, so she could put any capital gains tax into the specified type of retirement account.
Angelina most likely is able to receive the 50% small business reduction. This means that she can multiply half of her profit, and subtract it from the capital gain and only have to pay that amount. Angelina and Sean would have to meet certain requirements in order to get a small business exemption. Some further research would have to be done in order to see if they met those requirements.
According to Active Asset Reduction law, "There are other CGT small business concessions, in addition to this concession, that may apply to reduce your capital gain. You can apply as many concessions as you are entitled to until the capital gain is reduced to nil. There are rules about the order you apply the CGTconcessions...."5
With regard to Angelina and Lena's business, most likely the trading stock could be rolled over since it is such ...Download file to see next pagesRead More
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