Answered: dvise Michelle of the income tax…

Business

Accounting

dvise Michelle of the income tax consequences on receipt of $210,000 from Alex.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On 10 September 2021, Michelle purchases a 10-year annuity from the “Retirees Gold Ltd” (RGL). Under the agreement, Michelle pays a lump sum amount of $1 million, and in return RGL would pay her $24,000 per year over and above Michelle’s $1 million investment. On 16 September 2021, Michelle sells the right to receive the annual payments to Alex for $210,000.

Required: Advise Michelle of the income tax consequences on receipt of $210,000 from Alex. Cite relevant legislation and cases in support of your answer.

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