Question 6

Please click on only one check box option in answer to each of these parts.

1. Regarding capital gains tax, which of the following statements is correct?

A. The sale of a motor vehicle may result in a capital gain or a capital loss

B. When the disposal of property is by gift, the capital proceeds are taken to be nil

C. Net capital losses are not deductible against any assessable income other than a capital gain

D. When an asset is sold with capital proceeds received in instalments, the capital gain will be apportioned among the years when the capital proceeds will be received

2. Which of the following is not a personal use asset?

A. A holiday home on one hectare of land

B. A set of golf clubs

C. An option to acquire a personal use asset

D. A debt relating to a personal use asset

3. Jack Jones was a farmer. His father was also a farmer. Jack Jones received a gift of 50 cattle from his father. The cattle had cost his father $10,000 and at the date of the gift the cattle had a market value of $17,500.

Which amount is assessable to the father for the gift?

A. Nil

B. $7,500

C. $10,000

D. $17,500

4.  Consider the following items:

(i) An engagement ring, which cost $5,000;

(ii) A second-hand car purchased for $2,000;

(iii) Shares in BHP;

(iv) A painting hung in the foyer of your accounting firm; 

(v) A holiday house at Byron Bay

Which of the following statements is correct?

A. (iii), (iv) and (v) are CGT assets

B. None are CGT assets

C. Only (iii) and (iv) are CGT assets

D. (ii) and (iv) are CGT assets

5. Jay sells his business and assets to Kay. At a cost of $1,000, Kay has drawn up an agreement that she will not operate a similar business within a 100 km radius for a period of five years. On the date of sale the agreement is signed. What CGT event will occur with a cost base of $1,000?

A. A1-Disposal of a CGT asset

B. C2-Cancellation or surrender of a CGT asset

C. D1- Creation of contractual rights in another entity

D. There are no CGT consequences

6. ABC Ltd. is a company that owns a pine tree plantation. During the current year, ABC Ltd. expended $50,000 on fertilisers, sprays, etc. to maintain trees that would not yield income for another 10 years.

The $50,000 is:

A. To be apportioned over the life of the trees as it is not all related to the current year under 58-1

B. An allowable deduction under s8-1 because it is incidental and relevant to the earning of future income

C. A capital improvement that can be depreciated under Div 43

D. Not an allowable deduction under 58-1 because there is no assessable income at the current time from these trees

7. A depreciating asset used 80% for income-producing purposes has an adjustable value of $12,000. It has a termination value of $9,600. What is the balancing adjustment?

A. Nil

B. $4,800 deductible

C. $,920 deductible

D. $2,400 deductible

8. Jo is a dentist and a lecturer. She works at the community dental service in the mornings, attending to patients. At midday, she catches a bus to the local university where she lectures in dental hygiene. At the end of the day, she takes the train home. Which of the following statements is most correct?

A. The bus fare is deductible

B. The train fare is deductible

C. Both fares are deductible

D. Neither fare is deductible

9. Which of the following expenses is deductible under s8-1 of ITAA97?

A. Child minding expenses incurred to enable a mother to go to work

B. Travel expenses from home to work to enable the taxpayer to get to work. The taxpayer's home is not regarded as a place of work

C. Travel expenses incurred by a full-time university student to enable him to get to his job at the end of the lecture. The job is unrelated to his studies

D. The cost of attending a two-day seminar incurred by a professional accountant to enable her to keep up with changes in accounting standards

10. Sarah runs her own public relations business. Which of the following expenses incurred by Sarah in the current financial year is deductible?

A. Salary costs of $300,000 

B. $7,500 in meal expenses relating to entertaining clients 

C. Salary costs of $5,000 in relation to employing her daughter who worked with Sarah for one week as part of her university training 

D. All of the above