You have recently taken a position as tax advisor with small suburban accounting practice, the following clients
Question:
You have recently taken a position as tax advisor with small suburban accounting practice, the following clients visit the practice and you are asked by the practice manager to write a short report on each client’s situation:
Client Number 1:
On 1st July 2019, a well-known television personality (we cannot say who so we will call her Ms X) has been paid a lump sum of $400,000 to encourage her to join a new television network. She has accepted the offer and received an annual salary of $100,000 in addition to the lump sum payment, paid in monthly instalments over the period 1st July 2019 to 30th June, 2020. She has also earned $$10,000 as a private in the army reserve, and received rental on a property she has owned for 5 years $12,000, against this she has paid insurance, rates and land tax to the extent of $6,000.
Required:
Write a report to the practice manager detailing how the Tax Office would treat these payments. You should refer where applicable to case law, and how this has influenced the classification of various revenue sources
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello