Aiden has been operating a printing and stationery supply business since November 2010. In April 2023, he
Question:
Aiden has been operating a printing and stationery supply business since November 2010. In April 2023, he agreed to sell his business and the land and buildings on which it is located for a total price of $1,200,000. A contract for sale was executed on 22 April 2023 and settlement took place on 8 June 2023.
The following items were included in the sale at the amount listed, with the balance of the sale price to be allocated to goodwill.
Trading stock | $60,000 |
Plant & equipment | $90,000 |
Fixtures & fittings | $30,000 |
Land & Buildings | $780,000 |
In addition to the sale proceeds, Aiden also received a payment of $50,000 to not compete with the new owners within a radius of 10km for at least the next three years. This contract was also signed on 22 April 2023.
Thefollowing further information has been provided:
- Cash at bank on settlement date was to be retained by Aiden.
- Debtors (Accounts Receivable) owing on settlement date were to be collected by Aiden.
- Aiden turned 53 years old on 10 March 2023.
- The land and buildings were purchased by Aiden in September 2011 and the total cost base to him was $470,000.
- Goodwill was purchased with the business by Aiden in November 2010 at a value of $70,000.
- Aiden does not intend to retire but instead is taking up employment in his brother's handyman business.
- Aiden is single, with no dependents.
Required
- With reference to relevant Australian legal authority and using the ILAC approach, advise Aiden of the taxation consequences of the above transactions.
Financial Accounting Information For Decisions
ISBN: 978-0324672701
6th Edition
Authors: Robert w Ingram, Thomas L Albright