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TAXATION LAW TUTORIAL QUESTIONS WEEK COMMENCING 19 SEPTEMBER 2016 WEEK 9: PARTNERSHIPS AND INDIVIDUALS FROM SEMESTER 1 2013 EXAM Jenny and Frank are Australian residents in partnership as retailers of computer parts. The partnership records for the financial year ending 30 June 2016 disclose: Receipts: $400,000 Gross receipts from trading 20,000 Bad debts recovered 20,000 Net Exempt Income 10,000 Not Assessable Not Exempt Income 40,000 Net capital gain from the sale of shares acquired in 2004 10,000 Dividend 50% franked Payments: $200,000 Purchases of trading stock 50,000 Partners’ salary – Jenny 20,000 Partner’s salary - Frank 2,000 Interest on cash advance made to the partnership by Peter who is not a partner 10,000 Travelling expenses in respect of Frank travelling from home to work 50,000 Salaries and rent paid 2,000 Legal expenses in recovering bad debts 5,000 Borrowing expenses on a loan used for income producing purposes. The loan is for 6 years and began on 1 July 2015
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3,000 Painting business premises in June 2016 7,000 Replacing roof tiles of business premises immediately after purchase of business premises Other details: a) Jenny and Frank share the residual profits and losses on a 60% and 40% basis. b) Trading stock on hand 1 July 2015 $60,000 c) Trading stock on hand 30 June 2016 using the LIFO method: $50,000(at market selling value), $45,000(at replacement cost), $40,000 (at cost price). Trading stock on hand 30 June 2016 using the FIFO method: $100,000(at market selling value), $80,000(at replacement cost), $70,000 (at cost price). The partners wish to minimise their tax liability for the year ended 30 June 2016 d) The partners made a partnership net loss of $15,000 in the income year ending 30 June 2015 e) On 10 January 2016 Frank was robbed at gunpoint of the partners’ trading receipts of $20,000 while on the way to the bank. f) During the 2016 income year Frank received a net salary of $20,000 as a part-time lecturer at Monash University after PAYG of $5,000 tax was deducted from his salary by his employer.
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