On 30 October 1995, Brett Dutton bought an investment house in Port Campbell, Victoria. He has kept all the relevant financial evidence for capital gain tax purposes.

 

Purchase price of the property	$160,000	1st Element of the cost base
Accountant’s Advice	$500	Second Element-Incidental cost
Stamp duty on property	$3150	Second Element-Incidental cost
Other fees	$250	Second Element-Incidental cost
Commission on Sale	$6750	Second Element-Incidental cost
Advertising cost	$600	Second Element-Incidental cost
Interest on the loan	$25,800	Third Element- Operating costs-this amount has already been used to reduce the assessable income in the earlier years.
Insurance costs	$3,500	Third Element- Operating costs-this amount has already been used to reduce the assessable income in the earlier years.
Repair costs	$1800	Third Element- Operating costs-this amount has already been used to reduce the assessable income in the earlier years.
Rates & land Tax	$6,900	Third Element- Operating costs-this amount has already been used to reduce the assessable income in the earlier years.
A personal loan is taken to refurbish the laundry and bathroom	$45,000	Fourth Element- Capital Costs
Interest on Personal loan taken to refurbish the laundry and bathroom	$5,000	Third Element- Operating costs- This expense has not been deducted yet.
Selling Price of the property at the current date (2021 tax year)	$260,000

 

Required:

(a)    Calculate Brett's capital gain using the discount method. In your response, you must use the correct sequence to demonstrate the reduction of capital gain. 

(b)    Use the result from the above question (a) and assume the taxpayer also has another capital loss of $ $20,375. What would be his TAXABLE INCOME if he has earned other income from a salary of $55,000 during that year? 

Answer rating: 100% (QA)

Part a Capital gain Selling price Cost base 260000 160... View the full answer