Please answer all parts ofthe questionAll work presented forassessment in this course must comply with the format outlined inthe University’s Presentation of Academic Work publication.All essays must beaccompanied by a signed official cover sheet (‘PlagiarismDeclaration Form’).You MUST reference in thebody of the essay every time you use information from other people.This requires you to keep a track of where you are takinginformation from and then writing the reference up. You shoulduse the Harvard/APA style; and use the University’s newPresentation of Academic Work. The Library’s website also has acitation style guide site. If you plagiarise (intentionally ORunintentionally) you will be given zero.1,500 to 2000words.STUDENTS MUST CHOOSE ONE OFTHE FOUR QUESTIONS TO COMPLETE QUESTION 1: John Jones is employed in apart time capacity as lecturer in accounting at Central University.His annual salary is $42,000 pa. Jones has arranged with his employerfor his salary to be paid on the 15thday of every monthinto his savings account with the State Bank Ltd. Jones uses thesavings account to meet household expenditure. Jones also has a homemortgage loan with the State Bank.Under a separate agreementwith the bank Jones has arranged for a balance of $5,000 to bemaintained in the savings account and any balance to be transferredto his mortgage. He has also arranged for any interest on the savingsaccount to be offset against the mortgage interest. For the yearended 30 June 2017 $300 was offset.Jones also runs a smallpractice providing accounting and taxation services to localbusinesses. During 2016/17 he billed fees of $35,000 of which $30,000has been received. An amount of $3,000 was also received fromoutstanding accounts from the 2014/15 year. One of his clients isTravelco, a local motel. In March 2017 Travelco provided Jones andhis wife with free return air tickets to Bali. Equivalent fares wouldcost $2,000.Jones’s wife Joan is an ITexpert. For several years John and Joan had been developing softwarefor an accounting package for use by small businesses. The system,‘J-Accounts’, has been licensed and is used by 175 localbusinesses at a cost of $100 per year [$17,500]. A national softwaredeveloper ‘Cashbooks’ has agreed to pay the Joneses $25,000 inreturn for the exclusive rights to use the program for five yearsafter which time a new agreement for a further five years may besigned.Jones has an interest inhistory, particularly commercial history. In 2005 he purchased 500old share certificates from an acquaintance who practised in the areaof insolvency and liquidation. The total cost was $500. Thecertificates related to old companies that had been liquidated duringthe 1930s depression. They were very elaborate and ornate and Jonesthought that framed they could be marketable as a decorative featureto hang in the offices of accountants and solicitors. In February2017 he happened to mention the matter to Herman, a local decoratorand picture framer. Herman suggested that if properly framed,numbered, and if an inscription was added, they could sell for $1000each. The cost to Jones would be $100 per certificate. Herman agreedto sell the items on a commission basis of 10%.A local television stationruns a quiz show called ‘Who Wants to be Rich?’ Contestants areselected randomly from the local telephone directory. Jones was luckyenough to be selected and he appeared on the show for five nights,answering every question and becoming ‘Grand Champion’. He won$200,000 and a car valued at $30,000.Required:Advise John Jones of the taxconsequences of the above receipts. You should discuss what amountswould be included in his assessable income or, if any item is notassessable income, why that is so. Your answer should include adiscussion of the following:Whether he return on acash or accrual basis.Whether particularamounts are ordinary income or statutory income(including capital).Under what sections ofthe Acts the particular amounts are assessable.How the quiz showwinnings are to be treated.What are the taxconsequences of the share certificate proposal, if hewas to proceed with the plan?What case law is relevantto the issues raised? QUESTION 2: Identify the types of taxesthat apply to digital currencies (such as Bitcoin) in Australia atthe present time. In your answer you should list relevant ATORulings/Determinations and discuss their application. QUESTION 3: Part A Allan and Betty were livingand working in Melbourne. They decided on a ‘tree change’, soldtheir Melbourne home and purchased a large country house on a 10hectare block in central Victoria. Betty works part-time as anaccountant and Allan as a locum doctor. Allan is popular with theelderly patients in the town and regularly is given home-made cakesand scones, along with his fee. On one occasion he treated a localwine maker’s dog for snake bite when the vet was unavailable andwas given a dozen bottles of Lonarch Brae Shiraz in appreciation.The wine had a retail value of $360.Allan and Betty enjoygardening. They plan to establish a few hectares of grape vines andbegin growing vegetables. They attend a continuing education courseon organic farming and find in their second year they have a surplusof produce. Betty started making marmalade and relish using hermother’s recipes. Initially she gave them to neighbours but theybecame so popular that she opened a stall at the Newtown GrowersMarket held on the second Sunday of every month. Allan sold some ofthe excess to a local supermarket and now regularly supplies threeretailers with sweet potatoes and pumpkin. They don’t keep recordsas they never intended to make a profit but estimate that in a goodmonth gross receipts could be $500 to $600.Their neighbours have a citrusorchard and throughout the year vegetables are swapped for orangesand mandarins. This seems like such a good idea Allan and Bettydecide to set up a ‘barter’ system in the area. To join thesystem a person must pay an up-front, one-off fee of $50 to Allan andBetty as a charge for the keeping of administrative records.Thereafter people register their goods or services to be bartered.For example, Suzie is a retired hairdresser and will providehairdressing services at her home. No money changes hands. Suziewould receive a credit to her account of 15 to 20 ‘barts’ thatshe can exchange for goods or services of equal value from otherregistered participants in the scheme (fruit, vegetables, childminding, lawn mowing etc.).Required: (a) Advise Allan ofany income tax consequences of para 1, above. (b) Citing relevantcase law, explain how a hobby is to be distinguished from a business. (c) Advise Allan andBetty of any income tax implications arising in paras 2 and 3above. (d) Advise theparticipants in the barter scheme of any income tax implications.Part B On 1 October 2010 Alexpurchased a large block of land near the beach at a cost of $250,000financed by an interest-only loan. Other costs in respect of the landpurchase were: Stamp duty 6,800Legal costs of conveyance2,500 Water rates – included in contract 380 Council rates –included in contract 900 Originally Alex’s intention was to holdthe land as an investment but in 2016 he decided to take unpaid leavefrom his employment and build a house on the block. The plan was toengage building contractors and perform unskilled labouring himself.On completion the house would be rented.The following costs wereincurred:1 April 2016Establishment fee for interest-only bank loan 1,5002 April 2016 Developmentapplication fee to local Council 4,20020 April 2016 Legal feesarising out of an appeal against theCouncil’s refusal ofthe development application 16,00015 May 2016 Architecturalfees 6,500May – July 2016Building materials 120,000Building contractor’spayments 60,000Alex’s labour: based onAlex’s time at $25/hr overthree months 13,000The house was completed inSeptember 2016 and rented out until 30 June 2017. Interest paid overthe period September 2016 to 30 June 2017 was $14,600. Totalinterest paid however was $122,500.On 15 July 2017 Alex obtaineda qualified valuer’s appraisal of the property which put the valueof the land at $350,000 and the house $350,000. The valuation cost$4,000.In October 2017 Alex sold theproperty to his cousin Matthew for $650,000.Required: 1. Advise Alex whether theamount of $650,000 is ordinary income, assessable under s6-5 orwhether any amount is assessable under s15-15.2. Assuming the proceeds ofsale is not income by ordinary concepts (or s15-15 assessable),calculate the cost base of (a) the land and (b) the house for CapitalGains Tax purposes. Explain what amounts are included and excluded.Cite relevant provisions of the legislation.Assume the cost base ofthe property is $600,000. Calculate the Capital Gain. Cite relevantlegislation,QUESTION 4 Part A: Housing affordability is agoal of governments and opposition parties in Australia. A topic ofdiscussion in the media is whether negative gearing combined with thecapital gains tax discount (‘tax concessions’) increasesspeculative activity in the housing market – to the disadvantage ofthe first home buyer.Required Identify and evaluate keyarguments both for and against retaining these tax concessions ifhousing affordability is to be achieved. In your response you mustexplain what is meant by negative gearing and how capital gainsarising from property investment are treated. You should refer tosections of legislation, tax rulings and cases where relevant.Part B: Jai is 50 years old, currentlyemployed and planning to retire when he is 70. As part of his plansfor retirement Jai recently sold the large home he has lived in formany years – planning to purchase a smaller home to live in andalso an investment property. After paying expenses associated withthe sale and repaying his home loan Jai was left with $200,000 cash.Jai has placed an offer of $200,000 with a real estate agent topurchase a home which will be Jai’s principal place of residence.Jai has also placed an offer of $150,000 to purchase an investmentproperty to be used for rental income. Jai does not have enough fundsto complete the sales on both properties, but his bank manager hasapproved a loan for the shortfall of $150,000 at an interest rate of5% per annum.In order to prepare loandocumentation, the bank manager needs to know whether Jai will: a)use the $200,000 cash to pay for his new home and use the borrowedfunds of $150,000 to purchase the investment property;b) use $150,000 of the cash topay for the investment property and then pay for his new home withthe remaining $50,000 cash and the borrowed funds of $150,000; or c)pay for his new home by using $100,000 of the cash and $100,000 ofthe borrowed funds; and pay for the investment property by using theremaining $100,000 cash and the balance of the borrowed funds($50,000).Required: Assume Jai’s goal is to takeadvantage of negative gearing opportunities and receive the mostfavourable tax treatment. Advise Jai which of the three options –a), b) or c) – would best achieve this goal. Give reasons for youranswer.