Gross and Annual Income Calculation
This report will provide all information and details of different facts in relation to taxation and law. It will support in providing all details and facts related to the calculation of all deductible and taxable income. It will reveal and explain the principle of taxation and assured laws with tax avoidance and tax evasion. It will also provide details of the importance and purpose of taxation policy incurred related to taxation in the case property. It will also describe the facts and treatment of taxable income and annual payments mentioned in the assignment and different case studies. So overall this reading will obtain and describe various reasons and way of treatment of annual income.
Solution:
Annual payment income in case of any businesses can be taken as gross annual income and annual chargeable income which can be earned or gained in yearly basis by entities. When income gained by the lump sum payment and can be annual earned. Lottery period can be taken as a gambling activity and which can be drawn by the playing number of prizes. The government has been established various schemes and launched the presence of several regulations. So the lottery in the relation to preparing and gain to protect in the interest of gnarl people. It is found in the whole circumstances the value of whole lottery amount amounted through lump sum activity would be figured out to protect the level of public. In the case of overall payout of annuity, winners have to grasp the opportunity in order to earn jackpots. The capital gain tax has been taken as a payout of lottery income (Devereux, et. al., 2014)
Instead of this, all case of annuity income regarding payment, the income amount would be received by the winning person. And the amount will be fixed. E.g.: for an example, in every annual year the winner will gain $50,000 and the other entire motive will be that he will be restricted to change the term and condition of payout for the UN curtained financial and familiar condition. That time the winner cannot be able to make payment for the large value of the investment at all time because investment might result for all more cash compared to the value of interest amounted on the annuities.
Along with all these things, in the case of considering annuity payment income, the tax will be taxable and levied on $50,000. Other reason can be taken as considering behind through the income earned from payouts annuity and lottery for another next 20 years in future. Other than this, another cash flow after the death of the winner will be entitled to achieve the amount which would be given to the other estates of the affected people that would be considered as the income of effected winner. The third reason can be taken as that the winning amount $50,000 will be got by the winner with the date on which he would receive the amount at an initial time for every year and next 20 years. In the case of overall payout of annuity, winners have to grasp the opportunity in order to earn jackpots. The capital gain tax has been taken as a payout of lottery income (Burns, et. al., 2017).
Lottery and Taxable Income
Solution:
As it is known that any revenue generation and expenses can be reported when would be realized on an accrual basis. Another thing is that the expenses should be matched with the income. All expense of the company shall not be reported until paid would pay in cash or occurred. On the other hand, the taxable income would be generated with the amount of earning an income which has to be used in calculating the tax. It is needed to give such tax to the government by owned individual or business. It is also known that the revenue generation and all expenditure would be taken as the realization of the accrual basis. It is required for the company or individual to generate the amount of table income (Chambers, et. al., 2017)
It can be taken as gross income that could be adjusted over deductions and exemptions, which would be allowed in the taxable year. Such kinds of taxable income are salary, investment, bonuses for an individual. When the topic is raised in the case of a company, taxable income can include such income which is raised from selling goods and commodities. It is also included all subsidies and grants provided by the government to the consumer and so on. It doesn’t include such expenses realized from the income to calculate taxable income by the company.
In the scheme of pharmaceutical benefits scheme, it refers the program to establish by the government of Australia in order to deliver subsidized and prescribed medicines to the customers and to a resident of Australia along as well as foreigners which can cover by Reciprocal Health Care Agreement. Schemes launched by the company ensure that the resident and localities’ would be able to buy an access such affordable drugs in an affordable price but the company will face the scrutiny which would increase their cost. Taxable income computation of Corner Pharmacy would be calculated as given below:
When the topic is raised in the case of a company, taxable income can include such income which is raised from selling goods and commodities. It is also included all subsidies and grants provided by the government to the consumer and so on. It doesn’t include such expenses realized from the income to calculate taxable income by the company. From the above computation, it was found that the Corner Pharmacy has applied accrual basis scheme that allows them to compute taxable income and total cost of sale of commodities to allow all deductions for tax purpose. Due to this condition taxable income of corner pharmacy would be $1, 70,000.
Computing Taxable Income and Expenses for Companies
Solution:
The case study of Duke of Westminster’s case is mostly cited in the words of tax avoidance. It was a case of 1936 Act 1 and a full citation was “Inland Revenue Commissioners vs. Duke of Westminster”. Duke of Westminster has appointed a gardener and he used to pay him after his post-tax income. It was substantial for the case that to reduce such taxation, duke started stops paying wages to the gardener. Even he ignored drawing up a covenant; he agreed to pay an amount equivalent to the value of each and every year (a specified period of time). But the Department of Inland Revenue refused to accept this and challenged all such arrangements of tax evasion. They challenged duke to the court and cases were made between IRC v. Duke of Westminster in 1936 which they, however, lost their case. It has been identified that the analysis and principle which would be established in IRC vs. Duke of Westminster employed a gardener and refused to give any payment to him. The payment of taxable income from the other post taxation income in order to deduct tax and payment would be made at every specified period (Gorry, et. al., 2018)
Tax avoidance can be taken as an arrangement which is required to manage and control the financial affairs in order to prepare facilities in such a manner to reduce the tax liability within the law. The usage method of paying tax amount would be paid to the taxpayer on the income. In addition to this, their practice would be done by the taxpayer on the income earned due to tax avoidance and evasion. In the addition to that knowledge, the financial situation of the people and company would reduce the method of modification related to an individual to reduce taxable amount of tax to be paid by the taxpayer when they would earn. It is the principle which is related to tax evasion and avoidance, it gives chance to the people to understand the financial affairs cleverly and a how to take tax advantages. It carries on the flexibility to be carried out creative tax strategies and financial tactics (Burns, et. al., 2017). Tax avoidance is the situation where all arrangements are made as per requirement of financial affairs and control over such matters effectively by verification of laws and judgments. Instead of this, there are the practice and relevancy earned by the taxpayers to evaluate tax liability and refer it to the tax evasion in order to reduce illegal acts and fraudulent matters.
Duke of Westminster’s Case and Tax Avoidance
In such kinds of situation, the principle of Ramsay “taxation evasion and avoidance” has become relevant. This principle conveys that all companies need to make substantial capital gain by getting into self-canceled of all complex series and situation of taxation fraudulent and wrong behavior in order to practice done by the practitioners and individuals. It generates illusions related to capital losses to avoid capital gain taxable income and then the authority gets an opportunity to take and charge taxable amount related to such transactions which come into an effect. Nowadays, Australian taxation office has mentioned and formed the tax avoidance task force in order to ensure scrutinize the taxation affairs that could be paid as taxable income which would be chargeable for private and public companies to pay the right amount of taxable value (Cesarini, et. al., 2017). Such kinds of principles have not an effect related to capital gain and capital income tax which includes all kinds of creative tax planning as done by the Duke of Westminster. Instead of this, there are the practice and relevancy earned by the taxpayers to evaluate tax liability and refer it to the tax evasion in order to reduce illegal acts and fraudulent matters. We can find out one thing that is an implementation of equitable assets over tax systems as capital gain in order to avoid tax evasion and imposing tax over every year (Figari, et. al., 2017).
Through the artificial arrangement has been made by the individuals to impose all specific and generic terms as anti-avoidance acts and provisions. Such results are the impact on complexities of tax valuation and legislation related to compliance expenditure of taxpayer as per given in the tax anti-avoidance systems. Avoidance of such taxation can be established related to legislation of anti-avoidance tax part IVA. Even he ignored drawing up a covenant; he agreed to pay an amount equivalent to the value of each and every year (a specified period of time). But the Department of Inland Revenue refused to accept this and challenged all such arrangements of tax evasion. It generates illusions related to capital losses to avoid capital gain taxable income and then the authority gets an opportunity to take and charge taxable amount related to such transactions which come into an effect. Such rules and regulation cannot be applied before the ending of financial years (Frecknall-Hughes, et. al., 2015). it gives chance to the people to understand the financial affairs cleverly and a how to take tax advantages. It carries on the flexibility to be carried out creative tax strategies and financial tactics. Tax avoidance is the situation where all arrangements are made as per requirement of financial affairs and control over such matters effectively by verification of laws and judgments. Nowadays, Australian taxation office has mentioned and formed the tax avoidance task force in order to ensure scrutinize the taxation affairs that could be paid as taxable income which would be chargeable for private and public companies to pay the right amount of taxable value (Figari, et. al., 2017)
The Principle of Ramsay and Taxation Evasion and Avoidance
Solution:
It is verified that capital gain depicts to that value related to the capital asset which provides higher value and amount compared to its purchase price. It is to figure out that capital asset cannot be realized until it’s sold out. In other words, capital loss will be referred as the value and amount attained in a similar manner, where the capital loss can be seen as the amount received by the seller not more than the purchase price. It also found that another capital gain can be taken as a property on rent for the maximum period of maximum 8 years. In the given case study, all capital assets are called rental property. So it is figured out that a couple has to purchase that rental property in as joint property and his husband Joseph has entitled for around 20% of profits gained from the property. His wife name Jane is possibly entitled to more than 80% part as profit (Chambers, et. al., 2017). On the other hand, it is observed that the Joseph is entitled to entitle whole loss, in the case study given in the question says that parties having covenanted contributed in 20:80 in their agreement. But it is realized that the parties have to bear the loss of around $40,000which would be totally entitled to bear by Joseph. On the other hand, such rule is to figure out the occurrence of the positive amount shown related to capital gain or loss account then it would be taken for the taxation purposes.
In the relation to this comfort, Joseph’s loss is carried forward to the current year with the occurrence of the capital gain in a current year. In a similar manner, until the amount of earned loss $40,000 has not been recovered so that the rest amount will be considered for the purpose of taxable income. Just for a reason, Joseph & Jane earned the profit of around 10,000 then the amount will be associated with the loss occurred in the previous year for a proportionate manner as $2000 would be reduced from $40,000 to 38,000 which was to be considered for taxation perspective (Doerrenberg, et. al., 2017)
Instead of this, the proportion for the profit was of $8000 for Jane which has to be considered for taxable purposes. In the case study, Joseph can set it off all loss for $5000. This will show the minimum value of $5000 which can be offset with the capital loss for around 8 years. After entering into an agreement, if couples decide to sell their property, the capital gain will be realized an entitled for such 20% of whole profit. On the other hand, it is observed that the Joseph is entitled to entitle whole loss, in the case study given in the question says that parties having covenanted contributed in 20:80 in their agreement In a whole manner, the loss was allocated for taxable purposes and financial analysis can be made in such a manner, that will be accounted for the capital gain or loss will be incurred by them all.
Conclusion:
It will conclude all such analysis related to taxable income and corner pharmacy which was $170000 which was computed by reducing expenditures from the income benefitted by the organization. On the other hand, the case of IRC vs. Duke of Westminster case study has been analyzed which described the principle of tax evasion and the value of avoidance principle. It is said that all Ramsey principle of taxation and anti-avoidance of income tax has been incurred by loss and capital gain by them. This report has also been included all capital loss and gains on a rental property which could be set off over capital gain for at least for 8 years at a minimum value of $5,000 every year to cover all capital loss against gain. On the other hand, such rule is to figure out the occurrence of the positive amount shown related to capital gain or loss account then it would be taken for the taxation purposes.
References:
Burns, S. K., & Ziliak, J. P. (2017) Identifying the elasticity of taxable income. The Economic Journal, 127(600), 297-329.
Burns, S. K., & Ziliak, J. P. (2017) Identifying the elasticity of taxable income. The Economic Journal, 127(600), 297-329.
Cesarini, D., Lindqvist, E., Notowidigdo, M.J. and Östling, R. (2017) the effect of wealth on individual and household labor supply: evidence from Swedish lotteries. American Economic Review, 107(12), pp.3917-46.
Chambers, V., Bland, E. and Spencer, M. (2017) Does the source of a cash flow affect spending versus saving?. Financial Services Review, 26(3).
Devereux, M. P., Liu, L., & Loretz, S. (2014) The elasticity of corporate taxable income: New evidence from UK tax records. American Economic Journal: Economic Policy, 6(2), 19-53.
Doerrenberg, P., Peichl, A. and Siegloch, S. (2017) The elasticity of taxable income in the presence of deduction possibilities. Journal of Public Economics, 151, pp.41-55.
Figari, F., Paulus, A., Sutherland, H., Tsakloglou, P., Verbist, G., & Zantomio, F. (2017) Removing homeownership bias in taxation: The distributional effects of including net imputed rent in taxable income. Fiscal Studies, 38(4), 525-557.
Frecknall-Hughes, J. and Moizer, P. (2015) Assessing the quality of services provided by UK tax practitioners. eJournal of Tax Research, 13(1).
Gorry, A., Hubbard, R. G., & Mathur, A. (2018) The Elasticity of Taxable Income in the Presence of Intertemporal Income Shifting (No. w24531) National Bureau of Economic Research.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
