LAWS20023 Australian Taxation Law Q Fast Ed is the owner of a new and second hand car business. He is really good at wheeling and dealing in the car selling business but is not very good at understanding the tax effect of some of his deals. Explain the tax effect of the following activities. (Each subsection is worth 3 marks.)

a) Fast Ed has several different cars in stock at year-end and is not sure how to value them or if he has different valuation options available. Explain in your own words the options Fast Ed has available to value his stock.

b) Fast Ed gave Slick Sam, a creditor, a car, which was in stock. The car was given in exchange for a debt of $18,000 Fast Ed owed to Slick Sam. The car cost Fast Ed $17,000 and was on the showroom floor for sale for $19,000.

c) Fast Ed really liked one of the cars that were traded in. He took it home for his daughter who now uses it everyday. He decides he is not going to sell this car and keep it for use in the family. He purchased the car for $19,000 and it could have been sold for $21,000

d) Fast Ed decided to put some of the Ford hatchbacks on sale for only $18,000. ;Ford had just announced a new model hatchback and it has great reviews. He was really concerned that customers would not consider buying the older models if he did not drastically reduce the selling price. Other dealers have told him they were 'not moving'. The Ford hatchback had cost $22,000 and was originally selling for $28,000. At the 30 June Fast Ed had 3 in stock.

QUESTION 2 (21 marks) Various taxpayers receive the following amounts during the 2014/15 income tax year: a) Salary income of $50,000 and a bonus of $10,000 from an employer. b) A prize of $2,000 for the best TV advertisement of the year. c) $500 received by an employee from an employer for costs incurred to travel to Sydney for work. The employee bought a return ticket on sale for only $120 and stayed with a friend while in Sydney. One of the conditions of the work related trip was that the employee could keep whatever remained of the $500 as long as the work required to be performed in Sydney was completed.

d) An iphone worth $1,000 from a client. e) $10,000 awarded as damages for personal injuries incurred by an individual in a car accident. f) A taxpayer buys a share during the year for $5. On the 30 June, the taxpayer still owns the share but it is now trading at $7.50 g) A taxpayer manages to 'acquire' some stolen televisions. He sells 15 of them and makes $10,000 during the tax year.

REQUIRED: Discuss the assessability or not of the above amounts. Each amount discussed is worth 3 marks. QUESTION 3 (6 marks)

Briefly explain in your own words (max 300 words) what a progressive tax rate structure is.