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Homework answers / question archive / 1
1. If a beneficiary is presently entitled to a distribution of trust income but is under a legal disability then: A the beneficiary must pay tax on the income distributed B the income is tax-exempt C) the beneficiary is entitled to a 'legal disability tax deduction' D) the trustee must pay the tax on the income distributed.
2.Which of the following transactions will give rise to an assessable capital gain? A Gerry purchased a car for $13,000 on 3 August 2015 and sold it for $18,000 on 25 November 2019 B Michael purchased a ticket in a lottery for a new home worth $500,000. He won the home and received it on 12 September 2019. He is currently using it as his home C George injured his arm in a work accident and was given $10,000 in compensation for the personal injury Philip purchased 1,000 shares in SOLAR for $9.00 each on 12 March 2015. He sold them for $11 each on 23 May 2019.
1.a beneficiary is presently entitled to income but under a legal disability the trustee will pay income tax based on each beneficiary’s share of the income.
Option (d) is the answer for this question
2.Following th Taxation guidlines the answer to the above question is - (D) Philip purchases 1,000 shares in SOLAR for $9.00 each on 12 March 2015. He sold them for $11 each on 23 May 2019.
The reason for the answer is becasue -
(A) - Sale of personal car is not a capital gain becasue it has a personal effect and used for personal purposes and doesn't attract capital gain.
(B) - Wining from Lottery will be taxable under the head Income from Other Sources instead of capital gains.
(C) - Compensation for personal injury will not be a capital gain as it carries personal effect and doesn't attract any capital gain.
(D) - Yes this is an example of capital gain, as the person is selling the shares (keeping it for more than 1 year, so Long term Capital Gain) after a duration of time.
