Several years ago, Kylie purchased a house near the beach which she only makes available for use by her relatives. Kylie’s friend suggested that she should place an advertisement for tenants in the newspaper occasionally and claim tax deductions for the property expenses. The purchase price was $800,000 and Kylie was required to pay $40,000 stamp duty on the transfer. She borrowed money from a bank to fund the purchase price and paid $100,000 in interest on the loan. In February 2021, she also paid $40,000 to a builder to renovate the bathrooms. In addition, she paid $20,000 in legal fees to block a proposed development nearby which would have obstructed the house’s picturesque beach views. On 7 June 2021 Kylie entered into a contract of sale of the property to a third party at the market value of $1,200,000. Settlement occurred in August 2021.

Required:

Advise Kylie regarding any relevant tax implications arising from the above facts in relation to the 2020/21 income year. In your answer, make sure that you apply the HIRAC methodology to refer to any relevant cases, legislative provisions, tax rulings, and principles of tax law, and include any relevant calculations.

Answer rating: 100% (QA)

Solution Solution According to dato near the beach which she only makej are the relevant t... View the full answer