Part A requires short answers to each potential income scenario. There is no word limit.

Part B requires essay answers to each question. There is no word limit..

Weighting: 30%

 

PART A

1. Discuss with reference to case law and legislation (where necessary), whether any of the following constitute income in the hands of the recipient:

 

(a) Performance bonuses received by an employee

(b) A payment made by a satellite TV company to a soccer player for being named the World’s Best Player

(c) A ‘free’ overseas holiday given by a big computer retailer to it’s best salesperson

(d) Proceeds from the sale of books, furniture and toys at a garage sale

(e) Frequent flyer points received by a lawyer in a firm in relation to work related travel paid for by his firm

(f) Poker winnings of a regular poker player

(g) A tip received by a waiter at a restaurant

(h) Interest from savings in a bank account

(i) A cash prize received by a game show contestant

 

PART B

 

2. Ms Marx recently sold her ice cream store, called ‘Communist Ice Cream’ in June 2015. In that income year, she made sales of $90,000. The purchaser paid Ms Marx $250,000 for the business and an additional $35,000 for Ms Marx agreeing not to operate or establish another ice cream store within a 20km radius of ‘Communist Ice Cream’. Discuss each of the transactions and identify Ms Marx’s ordinary income. Discuss with reference to case law and legislation.

 

3. Mr Guevara bought shares in ‘Fidel’s Slush Fund Pty Ltd’ for $5,000 in July 2015. He then sold them on the advice of his girlfriend. He rarely buys or sells shares unless his girlfriend advises him to do so. On the other hand, Mr Putin buys shares regularly and recently in May and June 2010 bought and sold two lots of shares for $10,000 and $4,000. Which amounts are ordinary income? Why? Discuss with reference to case law and legislation.

 

4. Mr Lenin is an embalmer. He earns commission income. He recently earned commission of $25,000. He further earned interest of $500, received a capital gain of $4,000 and earned an exempt income of $500. What his ordinary income for the year? (assuming all the income was earned in the same income year). Discuss with reference to case law and legislation.

 

END