NEED Advise Jim and Jane regarding the income tax implications arising from the above facts. HIRAC METHOD

In June 2022, Jim and Jane are approached by Sam who offers to purchase the Strathfield property for $1 million. Jim is so delighted that things seem to be going so well. He tells Pete, a former tenant who owed $2,000 in unpaid rent, not to worry about repaying the debt, saying that “the debt is forgiven”. The debt had been outstanding for twelve (12) months, and Pete had indicated that he would probably not be able to repay it. Jane is angry that Jim did not check with her first, but Jim says, “Not to worry love, I’ll just claim a tax deduction,” and she soon cheers up. On 20 June 2022, Jim and Jane enter into a contract to sell the Strathfield property to Sam for $1 million, however Sam fails to secure finance and is unable to complete the contract. As a result, there is no change of ownership of the property.

Answer rating: 100% (QA)

The contract to sell the property was not binding because at the time of entering into the c... View the full answer