Five years ago, Chris opened a restaurant in North Perth, specialising in chili crabs. This year, he wishes to sell his restaurant business including the chili crab recipe and clientele to John for $500 000. Assuming the goodwill has a value of $100 000, advice Chris as to the tax consequences of the following: The contract allocates $200 000 for the restrictive covenant. Would your answer differ if Chris sold the business on retirement? Chris only sells the chili crab recipe for $100 000. Question 4 Helen acquired a commercial property in 1974. In May last year she entered into a contract to sell the property for $2m. A deposit of $200 000 was paid under the contract. An instalment of the purchase price of $500 000 was also paid in August last year, in accordance with the contract, with settlement due in that month. The purchaser later defaulted and the deposit was forfeited in June last year. Legal action was commenced against the purchaser and settled in November last year, on the basis that the vendor was entitled to retain the instalment already paid under the contract. The property was resold soon after in December last year. How will the forfeited deposit and the forfeited instalment be assessed for tax purposes?
Five years ago, Chris opened a restaurant in North Perth, specialising in chili crabs. This year, he wishes to sell his restaurant business including the chili crab recipe and clientele to John for $500 000. Assuming the goodwill has a value of $100 000, advice Chris as to the tax consequences of the following: The contract allocates $200 000 for the restrictive covenant. Would your answer differ if Chris sold the business on retirement? Chris only sells the chili crab recipe for $100 000. Question 4 Helen acquired a commercial property in 1974. In May last year she entered into a contract to sell the property for $2m. A deposit of $200 000 was paid under the contract. An instalment of the purchase price of $500 000 was also paid in August last year, in accordance with the contract, with settlement due in that month. The purchaser later defaulted and the deposit was forfeited in June last year. Legal action was commenced against the purchaser and settled in November last year, on the basis that the vendor was entitled to retain the instalment already paid under the contract. The property was resold soon after in December last year. How will the forfeited deposit and the forfeited instalment be assessed for tax purposes?
Chapter11: Property Dispositions
Section: Chapter Questions
Problem 87TA
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Transcribed Image Text:Five years ago, Chris opened a restaurant in North Perth, specialising in chili crabs. This year, he wishes to sell his
restaurant business including the chili crab recipe and clientele to John for $500 000. Assuming the goodwill has a value
of $100 000, advice Chris as to the tax consequences of the following: The contract allocates $200 000 for the
restrictive covenant. Would your answer differ if Chris sold the business on retirement? Chris only sells the chili crab
recipe for $100 000. Question 4 Helen acquired a commercial property in 1974. In May last year she entered into a
contract to sell the property for $2m. A deposit of $200 000 was paid under the contract. An instalment of the purchase
price of $500 000 was also paid in August last year, in accordance with the contract, with settlement due in that month.
The purchaser later defaulted and the deposit was forfeited in June last year. Legal action was commenced against the
purchaser and settled in November last year, on the basis that the vendor was entitled to retain the instalment already
paid under the contract. The property was resold soon after in December last year. How will the forfeited deposit and the
forfeited instalment be assessed for tax purposes?
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