Baldrick bought an investment property on 1 July 2018 for $2,000,000. He rented out his property from
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July 2018. He borrowed $1,800,000 on the same day from the bank to buy the property. The term of the
loan was 8 years. The building was originally constructed in 2001 at a cost of $900,000. He received rent in
cash from his tenants during the year ended 30 June 2019 in the amount of $93,000. Included in this
amount was a payment of $9,000 on 30 June 2019 as rent for the month of July 2019.
Baldrick incurred the following expenses during the year ended 30 June 2019 in relation to the property:
State Government Land Tax $22,500
Loan Repayments ($52,000 principal and $130,000 interest) $182,000
Real Estate Agent's fee to evict a tenant for non-payment of rent $2,300
The front window was badly damaged at the time of acquisition and replaced on 4 July 2018 $2,800
A new refrigerator was purchased on 1 March 2019 $3,800
Loan application fee (paid on 1 July 2018) $2,000
Legal costs for the loan to buy the property (paid on 1 July 2018) $2,600
Legal costs for buying the property (paid on 1 July 2018) $4,600
Stamp duty on the purchase of the property (paid on 1 July 2018) $95,000
Baldrick wants to minimize his taxable income for this year. Assume all depreciating assets, if any, have an
effective life of 6 years. He does not wish to use the SBE election.
Required:
Advise Baldrick as to what his taxable income or loss is for the year ended 30 June 2019.
You must give reasons for your answer. Your discussion must include an analysis of the pertinent sections
of the relevant legislation, rulings and the relevant case law. If relevant, you must show your calculations.
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
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