Jenny and Jess are Australian residents who jointly own two investment properties. One of the properties is
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Question:
Jenny and Jess are Australian residents who jointly own two investment properties. One of the properties is in Lakemba and the other is located in Bankstown. They also jointly hold a portfolio of shares, comprising 2,000 shares in an Australian resident bank, CAB Bank, and 1,000 shares in a US resident company, Newcrast. Both investment properties were purchased in June 2013 and cost $500,000 each. In February 2022, renovations costing $60,000 were made to the Lakemba property. The renovations were paid for by Jess from her personal savings. It was agreed that Jess should be paid interest of 10% pa for the cash advance of $60,000. In June 2022, the Lakemba property was sold for $750,000.
Financial records for the current income year ending 30 June 2022 are as follows:
Rental income from both properties $110,000
Fully franked dividends from CAB Bank 7,000
Dividends from Newcrast 2,000
Sale of Lakemba property 750,000
Payments Interest mortgage on investment properties 30,000
Rates on Lakemba property 2,500
Rates on Bankstown property 2,000
Travel between investment properties 1,000
Interest paid to Jess 6,000
Lakemba property renovation 60,000
Required:
Advise whether the agreement to allocate to Jess 80% of the income from the jointly held shares and investment properties, with the remaining 20% going to Jenny is effective for tax purposes
Calculate the net capital gain/loss on the sale of the Lakemba property
Calculate the allocation of income to Jess from the above facts
Note: Your answer must be supported with reference to legislation, case law and any relevant tax rulings.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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