Taxation Cases Description

Discuss whether Fred is a resident of Australia for taxation purposes.

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The residency of an individual has implications on the tax incomes that an individual has to pay in the United Kingdom. The resident factor that has tax implications on the income of an individual is whether an individual is a permanent resident or not. That describes an individual that is either permanently housed in the UK or not. Moreover, the tax implications that come with residency also matters if the individual was ordinarily resident in the country (born and raised) or if the individual moved into the country (Debrot et al., 2010). Typically, the tax year runs from 6th of April to 5th April of the following year. Thus, for instance, an international student who lives in the UK is entitled to the income tax reliefs and the tax allowances of the UK. It is necessary t understand these tax guidelines for the purpose of enabling the citizens to understand their rights.

For Fred, he is not a resident of Australia. The first reason to back this position is the fact that Fred is a permanent resident of the UK because he has a house which he has only rented out. The tax laws of the country that were last amended in 2013 posit that if one is a resident of the UK and permanently domiciled in the country, an individual will have to pay the taxes on all the gains and incomes within the tax year. That is regardless of whether the gains and incomes arise in the UK or from an overseas state. Therefore, for Fred, he will have to pay the taxes for the incomes that he accrued within the tax year for all the incomes. That includes the rental income, the investment interests, and even his salary.

Another reason why Fred is still a resident of the UK and not Australia is because Fred returned to his country before the tax year ended. The study reveals that Fred's health was the reason why he returned to the UK only after eleven months. As mentioned earlier, the tax year runs for twelve months between 6th April and 5th April of the following year.

Case study 2

Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159

The case has been a guiding principle that has enabled the decisions regarding the criteria for taxation. The case was about the determination of the taxation consequences. The decision that was arrived at by the judge, in this case, was that the size of the gain should not be the tax criterion but instead the source of the gain (Pesko et al., 2013). In this case, the consideration is the source of the gain that an individual which has been a source of disagreements among scholars. The reason for this is the fact that when the size of the gain is used as a basis for taxation, inequality of the economy is enhanced where the rich are taxed less than the members of a lower social class. That is evidence of an unequal economy where the poor are suffering. The case was a consideration f the issue concerning the realization of a capital asset. The case also involved whether or not the profit that is gained from the transfer of the asset was to be assessed in the same way ordinary capital or income is handled tax-wise.

Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188

The issue that this case considered was that of business income and whether the sale and subdivision of land which has been under use as a mining area by a mining company can be looked at as a mere realization of a capital asset or just ordinary income. In this case, the affected company had acquired 1771 land acres which they used as a coal mining area until 1924 when the coal became exhausted (Debrot et al., 2010). The company, having no further use for the land, proceeded to divide up the land and sell it. The issue being discussed here, in other words, is that whether the realization of an asset ceases to be a realization only because of the extensive work done on it or not so that it fetches the best price. Typically, a mere realization of an asset is the category of a subdivision project that will yield the highest income.

FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR

This case begs to understand whether an extraordinary business transaction can be treated as a business income. The High Court, in this case, expanded the scope for receipts of one-off transactions that are isolated so that they can be treated as ordinary income (Wells, 2012). Moreover, the High Court also limited the instances in which the proceeds would be looked at as flowing from the mere asset realization. In the case, the tax paying company acquired 1,584 land acres in a bid to promote the shareholders interests who happened to be fishermen. The purpose of buying this land is to enhance the access of the shareholders to the fishing tracks at the beach. Later on, in 1967, three companies endeavored to acquire the land for subdivision and sale in a bid to get profit. In a bid to prevent the outright purchase of the land from being assessable under Sec 25A(1) ITAA 36, the development companies bought shares into the Whitford Company after which they altered the constitution of the company resulting in re-zoning and land development.

Statham & Anor v FC of T 89 ATC 407

The case is bent on the determination of whether a loss incurred from an isolated property sale can be deducted in agreement with the subsection 51 (1) of the ITAA (Income Tax Assessment Act) of 1936 (Pesko et al., 2013). In the case, the taxpayer together with his spouse incurred a capital loss while disposing off their property. This capital loss then became subject to the provisions of the capital gains tax and cannot be deducted under the subsection 51 (1). The reason for the high court decision that the capital loss should be deductible is that the taxpayer intended to make a profit from the isolated transaction. Moreover, the loss of the taxpayer was incurred while in the course of carrying on business. Thus, the loss must be assessed under the provisions of the ITAA. The taxpayers also failed to carry out prior consultations regarding the profitability of the land which makes them liable for the loss.

Casimaty v FC of T 97 ATC 5135

The Casimaty vs. FC case worked on solving the issue regarding the gain realized from the sale of primary production land that has been subdivided. The issue is whether this type of gain can be viewed as a capital gain following the subsection 104-10 (4) of the ITAA of 1997. The decision arrived at in this case was that the gains arrived at in these circumstances are capital gains. The reason for this court decision is that the case demonstrates where the profit-making intention is absent during the acquisition of the land, the likelihood of the profit made following the eventual sale of the land being looked at as income in line with ordinary concepts become diminished. Moreover, the taxpayer never undertook the land sale as a separate operation of the business which makes the profit capital gain and not revenue.

Moana Sand Pty Ltd v FC of T 88 ATC 4897

The ruling, in this case, provides taxation advocates in the determination of whether the profits acquired from isolated transactions can be viewed as income which makes them subject to the provisions of the subsection 25(1) of the ITAA of 1936 (Wells, 2012). Outside transactions are those that the taxpayer does outside the normal business course or the transactions that non-business taxpayers enter. The intentions of the taxpayers were important in the arrival of the court decision where the court posited that the taxpayer had dual purposes which it ruled was sufficient to provide the asset with the character of a revenue asset. The court described the case as the fulfillment of the primary purpose that the company had concerning the land in question. In a nutshell, this case brings to light the position that having dual intentions or purposes can be enough to render any profit to revenue.

Crow v FC of T 88 ATC 4620

Regarding this court case, the issue under the limelight is that of whether the losses incurred from an isolated property sale is deductible under the ITAA of 1936 subsection 51(1). The decision by the High Court was that it is not possible (Whitaker. 2011). The taxpayer in conjunction with the spouse incurred a capital loss while disposing their property. Thus, the capital loss incurred by the taxpayer and the spouse is examinable under the provisions of the capital gains tax. The reasons following this decision is that the loss facing an isolated transaction can be deducted if the taxpayer intended to derive profit from this transaction. Moreover, the taxpayer incurred the loss while carrying on a business which makes the loss a capital loss and thus subject to the provisions of the law. The fact that the taxpayers underwent a haphazard pre-evaluation of the property before taking it up makes them liable for the capital loss that they incurred.

McCurry & Anor v FC of T 98 ATC 4487

This case is also about the loss that the taxpayers (Mccurry) incurred from an isolated transaction. The High Court ruled that the loss was a capital gain because the taxpayers entered the business to (or intending to) making profit (Wells, 2012). Thus, the loss occurred while the taxpayers were carrying on their business. It was the courts contention that the decision on whether or not the transaction was a result of carrying on the business depends on objective facts. The taxpayers mind is not sufficient to prove that the transaction transpired in the course of business. The taxpayers failed to evaluate the property before selling it which resulted in loss penalties on their part. The haphazard preparation resulted in the loss which makes the taxpayers liable for the loss under the provisions of the ITAA of 1936.

References

Debrot, K., Tynan, M., Francis, J., & MacNeil, A. (2010). State Cigarette Excise Taxes-- United States, 2009. JAMA: Journal of the American Medical Association, 303(19), 1909-1911.

PESKO, MF; LICHT, AS; KRUGER, JM. Cigarette Price Minimization Strategies in the United States: Price Reductions and Responsiveness to Excise Taxes. Nicotine & Tobacco Research. 15, 11, 1858-1866, Nov. 2013. ISSN: 14622203.

Wells, C. W. (2012). Fueling the Boom: Gasoline Taxes, Invisibility, and the Growth of the American Highway Infrastructure, 19191956. Journal of American History, 99(1), 72-81.

WHITAKER, R. (2011). United Kingdom. European Journal of Political Research, 50(7/8), 1164-1174. doi:10.1111/j.1475-6765.2011.02045.x