Paula is a resident of Australia for tax purposes and has

Paula is a resident of Australia for tax purposes and has

Paula is a resident of Australia for tax purposes and has informed you of the following transactions which occurred during the income year ended 30 June 2014.Paula also informs you that she has carried forward capital losses from the 2012 year of $4,000.This loss relates to the sale of shares.Additionally she has a $700 carried forward capital loss from the 2009 income year in relation to the sale of anantique.

Vacant Land and House

Paula purchased a vacant block of land inBrisbane QLD on 1October 1984 for $87,000 for investment purposes. On 1 July 2012 Paula sub-divided the land into two equal allotments at a cost of $40,000. At the time of the sub-division the total land area had a market value of $230,000. The total cost of council rates and other maintenance fees incurred on the vacant land up until 1 July 2012 was $27,000.On 1 January 2013, Paula entered into a contract with a builder to build a house on one of the blocks of land. The construction commenced on 1 February 2013. The total cost of construction of the house was $320,000 and the construction was completed on 1 August 2013.

After the construction was completed, the new home was rented out to tenants immediately.Paula entered into a contract on 1 January 2014 to sell the new home (with tenants) for $620,000.Information provided by the local Council indicates that at the time of the sale, the relevant land was valued at $345,000. During the period the property was rented out Paula incurred $1,200 in council rates and fees and $7,000 in interest on a loan taken out for construction of the house.

On 1 June 2014 Paula entered into another contract to sell the remaining vacant block of land for $405,000. Settlement took place on 1 August 2014.Paula incurred $3,800 in council rates and maintenance fees during the period 1 July 2012 through to the sale of the land.

Shares

Paula acquired1,000 shares in XYZ Ltd on 1November 2007 at a cost of $7,500.She also incurred $450 in brokerage fees at the time of purchase.On 1March 2014, she also acquired an additional2,000 shares in XYZ Ltd from her Grandmother’s estate.Her Grandmother died on 1 February 2014 when the shares had a market value of $11 each.Her Grandmother had acquired the shares on 1 July 2000 at a total cost of $6,000.Paula sold all3,000 shares on 1 June 2014 for $45,000. She incurred $900 in brokerage fees and transfer costs at the time of sale.

Required:

Advise Paula as to her net capital gain included in assessable income for the income year ended 30 June 2014 as a result of the above transactions. Perform calculations of any relevant capital gains and support calculations and discussions with legislation and/or cases where relevant.

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