Required: Advise Tom, Katie and Fallon regarding the income tax implications arising from the above facts in relation to the 2020/21 income year. In your answer include the calculation of Tom's and Katie's taxable income or tax loss for the 2020/21 year of income and make sure you refer to any relevant cases, legislative provisions, tax rulings and principles of tax law.

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$1,000 for agent's fees, and $50,000 interest on the BigBank loan, in relation to the property during the 2020/21 year of income. Tom and Katie also used the Strathfield property themselves for two (2) weeks during the 2020/21 income year when they needed a place to stay, while their home in North Sydney was being renovated. A few years ago, Tom also purchased a house near the beach for private use. He is the sole owner of this property. The purchase price was $2 million and Tom was required to pay $60,000 stamp duty and $15,000 legal fees on the transfer. He borrowed money from a bank to fund the purchase price and paid $100,000 in interest on the loan. He also paid $80,000 to a builder to renovate the kitchen. In addition he paid $25,000 in legal fees to block a proposed multi-storey development nearby which would have caused a significant reduction in the value of Tom's property. On 7 February 2021 Tom entered into a contract of sale of the property to his brother Jim for $1 million (at the time the market value of the property was $2.5 million). Settlement occurred in March 2021. Tom is also a potential beneficiary of the Swift Family Trust (SFT), a discretionary family trust which carries on a business of providing project management services in relation to major projects in Australia. SFT is an Australian resident trust. The beneficiaries are Calli and his wife Maalinka, and their two children, Tom (30 years) and Jim (25 years). Calli is a foreign resident for tax purposes. Maalinka, Tom and Jim are Australian residents for tax purposes. The Trustee is a close family friend, Fallon. During the 2020/21 income year, the trust estate earned income calculated under trust law principles of $206,000. Fallon, the Trustee allocated the trust law income under a trustee resolution made on 15 July 2021, as follows: Beneficiary, Share: Tom 30% 6 Jim 40% Calli 10% Maalinka 20% $1,000 for agent's fees, and $50,000 interest on the BigBank loan, in relation to the property during the 2020/21 year of income. Tom and Katie also used the Strathfield property themselves for two (2) weeks during the 2020/21 income year when they needed a place to stay, while their home in North Sydney was being renovated. A few years ago, Tom also purchased a house near the beach for private use. He is the sole owner of this property. The purchase price was $2 million and Tom was required to pay $60,000 stamp duty and $15,000 legal fees on the transfer. He borrowed money from a bank to fund the purchase price and paid $100,000 in interest on the loan. He also paid $80,000 to a builder to renovate the kitchen. In addition he paid $25,000 in legal fees to block a proposed multi-storey development nearby which would have caused a significant reduction in the value of Tom's property. On 7 February 2021 Tom entered into a contract of sale of the property to his brother Jim for $1 million (at the time the market value of the property was $2.5 million). Settlement occurred in March 2021. Tom is also a potential beneficiary of the Swift Family Trust (SFT), a discretionary family trust which carries on a business of providing project management services in relation to major projects in Australia. SFT is an Australian resident trust. The beneficiaries are Calli and his wife Maalinka, and their two children, Tom (30 years) and Jim (25 years). Calli is a foreign resident for tax purposes. Maalinka, Tom and Jim are Australian residents for tax purposes. The Trustee is a close family friend, Fallon. During the 2020/21 income year, the trust estate earned income calculated under trust law principles of $206,000. Fallon, the Trustee allocated the trust law income under a trustee resolution made on 15 July 2021, as follows: Beneficiary, Share: Tom 30% 6 Jim 40% Calli 10% Maalinka 20%