Individual Income Taxes
Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 19, Problem 49P
To determine

State the time period in which the bonus is taxable to Person D and it is deductible by the employer.

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Germaine was employed during the first six months of 2021 and earned an $80,000 salary. During the next six months, he collected $7,200 of unemployment compensation. He borrowed $6,000 (using his personal residence as collateral) and withdrew $1,000 from his savings account (on which he had earned $60 interest). Germaine’s parents loaned him $8,000 (interest-free) on July 1 of the current year, when the federal rate was 3%. Germaine did not repay the loan during the year and used the money for living expenses. Please calculate Germaine’s adjusted gross income for the year.
In August 2021, Maxine found employment as a consultant for a small sustainability firm in Warrnambool. The contract includes an annual salary, which $62,000 plus superannuation has been received in the 2022 income tax year. Maxine was required to purchase wet weather gear and other protective clothing at her own expense, totalling $660. Her employer reimbursed her for the total amount and also provided her with a hand-held radio transceiver (cost $270) and tablet computer (cost $1,599 plus case $210) for whilst she is on site visits.  Explain the income tax and FBT implications of the remuneration package she is receiving from her employer, from both the employee and employer’s perspective.
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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