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Michael lives in Australia. Michael (aged 50) is considering selling his mechanical workshop.

Michael lives in Australia. Michael (aged 50) is considering selling his mechanical workshop. Michael has a purchaser who is interested in the business and he has advised them that his asking price is $1,120,000. Michael has calculated this asking price as follows;

Goodwill

$200,000

Fittings and Fixtures

$125,000

Trading Stock

$295,000

Building Premises

$500 000

$1,120,000

Notes:

1. All values stated above are market values.

2. Michael has advised that Fittings and Fixtures have an adjusted value (written down value) for tax purposes of $120,000 and an original cost of $180,000.

3. Trading stock is valued at a cost of $150,000 in the financial accounts.

4. The building premises were purchased on 1 July 2010 for $375,000 and has a current market value of $500,000. Taking into account building allowance the current tax cost base for the building is $350,000.

5. Michael started the business himself on 1 July 2005 from leased premises.

Michael is concerned about the tax consequences on the sale of his business and has asked for your advice.

Question: Calculate capital gain or loss for each sale of business and Net capital Tax

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