QUESTION 3B (6 MARKS) Isaac is an Australian resident taxpayer. On 21 October 2020, Isaac purchased...

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QUESTION 3B (6 MARKS) Isaac is an Australian resident taxpayer. On 21 October 2020, Isaac purchased 1,000 shares in Woolworths Ltd for $29.80 per share (total of $29,800). Over the past twelve months, the share price of Woolworths has increased substantially. It is now mid-September 2020. The share price of Woolworths is now $36.20 per share, meaning that Isaac's Woolworths shares are now worth $36,200. Isaac is contemplating selling his shares, which means that he would derive a gross capital gain of $6,400 (being $36,200 - $29,800). He is equally open to hanging on to them for a bit longer as he thinks the share price will continue to increase. However, Isaac remembers that someone advised him that if he sells his shares after holding them for more than 12 months, then he will be eligible for a 50% discount under the CGT discount method. As such, Isaac decides to hold onto the Woolworths hares a little longer. On 22 October 2020 (exactly 12 months and one day after buying his Woolworths shares), Isaac sells his 1,000 Woolworths shares at $37.10 (total of $37,100), deriving a gross capital gain of $7,300. However, as he has held the shares for more than 12 months, he is entitled to a 50% CGT discount, meaning that his net capital gain is only $3,650. REQUIRED: W a. In your own words, please explain the difference between tax evasion, tax avoidance and tax planning. (3 marks) b. Based on the facts in the question, in your opinion, has Isaac engaged in tax evasion, tax avoidance or tax planning? Please provide reasons for your answer. (3 marks) QUESTION 3B (6 MARKS) Isaac is an Australian resident taxpayer. On 21 October 2020, Isaac purchased 1,000 shares in Woolworths Ltd for $29.80 per share (total of $29,800). Over the past twelve months, the share price of Woolworths has increased substantially. It is now mid-September 2020. The share price of Woolworths is now $36.20 per share, meaning that Isaac's Woolworths shares are now worth $36,200. Isaac is contemplating selling his shares, which means that he would derive a gross capital gain of $6,400 (being $36,200 - $29,800). He is equally open to hanging on to them for a bit longer as he thinks the share price will continue to increase. However, Isaac remembers that someone advised him that if he sells his shares after holding them for more than 12 months, then he will be eligible for a 50% discount under the CGT discount method. As such, Isaac decides to hold onto the Woolworths hares a little longer. On 22 October 2020 (exactly 12 months and one day after buying his Woolworths shares), Isaac sells his 1,000 Woolworths shares at $37.10 (total of $37,100), deriving a gross capital gain of $7,300. However, as he has held the shares for more than 12 months, he is entitled to a 50% CGT discount, meaning that his net capital gain is only $3,650. REQUIRED: W a. In your own words, please explain the difference between tax evasion, tax avoidance and tax planning. (3 marks) b. Based on the facts in the question, in your opinion, has Isaac engaged in tax evasion, tax avoidance or tax planning? Please provide reasons for your answer. (3 marks)

Answer rating: 100% (QA)

A Difference between Tax Evasion Tax Avoidance and Tax Planning Tax Evasion This is illegal activity ... View the full answer