Milly, the wife of a notorious criminal and underworld gang leader, has signed a contract with a newspaper for the sole rights to her story, “My Life as a Crime Boss’ Moll”. Under the contract, the newspaper was to pay the full sum of $500,000 after the completion of the writing of the articles and the publication of the first part of the series, which occurred during the current income year. However, on the instruction of the taxpayer, only $50,000 was paid into her account; the remainder of the sum remained unpaid at the end of the income year. a. Discuss what part, if any, of the total contract value of $500,000 is assessable in the current income year. Give reasons for your answer with reference to relevant legislation, case law and any relevant ATO issued guidance.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Milly, the wife of a notorious criminal and underworld gang leader, has signed a contract
with a newspaper for the sole rights to her story, “My Life as a Crime Boss’ Moll”. Under the
contract, the newspaper was to pay the full sum of $500,000 after the completion of the
writing of the articles and the publication of the first part of the series, which occurred
during the current income year. However, on the instruction of the taxpayer, only $50,000
was paid into her account; the remainder of the sum remained unpaid at the end of the
income year.
a. Discuss what part, if any, of the total contract value of $500,000 is assessable in the
current income year. Give reasons for your answer with reference to relevant
legislation, case law and any relevant ATO issued guidance.

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Step 1

a.

Gross income less the adjustments and available tax deductions equal taxable income. The gross revenue of the federal government and most states is comprised of all receipts and earnings less the cost of items sold. Gross income is defined as "all revenue from any source," and does not include cash received.

The value obtained or which the taxpayer has a right to receive is normally the amount of income recognized.

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