On 10 August 1990 John bought a holiday home which he used every weekend. The property was never leased out. The property cost $150,000. He consulted with his accountant regarding the purchase and this advice cost him $500 in August 1990. In addition he paid stamp duty of $3,150 in August 1990. John used a loan to acquire the property and paid $250 stamp duty on the loan in October 1990. The property was sold in September 2013 for $280,000. Costs associated with the sale include commission of $6,750 paid to the real estate agent who sold the property and advertising of $600. Both of these expenses were paid in September 2013.
In December 1994 John’s next door neighbour, Shane Sutcliffe, disputed the placement of the fence and considered that some of the land on John’s side of the fence was in fact his land. It cost John $2,000 in various fees and costs to prove that the fence was correctly placed. Shane did not pay any of John’s costs.
John incurred the following expenses in relation to his holiday home:
• Interest on the loan totalling $25,800.
• Insurance costs over the period of ownership costing $3,500.
• Stairs leading to the second storey were repaired at a cost of $1,800.
• Rates and land tax of $6,900 in total were paid during ownership of the property.
• Interest of $3,000 was paid since October 1996 when John obtained a personal loan to refurbish the kitchen and bathrooms at a cost of $25,000.

Required:
(a) Calculate John’s cost base
(b) Calculate John’s indexed cost base.
(c) Calculate John’s reduced cost base.
(d) Calculate John’s net capital gain or loss.

Answer rating: 100% (QA)

a The cost base of an asset is the original cost of the asset plus any costs incurred to acquire hold or improve the asset In Johns case the original ... View the full answer