Batrisya helped Manisha clean up her old house before selling it. Manisha found

Question

Batrisya helped Manisha clean up her old house before selling it. Manisha found an antique mirror that she had five years ago for $800. She offered to Batrisya as a thank you gift for the assistance. It is now worth $2,000. After Manisha had moved into her new house, Batrisya gift Manisha a piece of artwork valued at $600. Batrisya purchased the piece for $500. Once Manisha moved in, she set up a separate room to organize her organic goods and equipment.

Please write on advising Batrisya and Ryan regarding the issues arising from the above fact situation. Please use the Australian Taxation legislation. (ITAA) Please mentioned about:

- The gifting of the antiques from Manisha to Batrisya. Whether its ordinary income or not because there is a motive of the donor. The CGT on antiques. (350 words)

- The gifting of artwork as a thank you gift from Batrisya to Manisha. Determine whether is it ordinary income or not? explain why? The CGT on the artwork. (350 words)

Explanation / Answer

In Australia truly gratuitous transfers are not considered income to the recipient, but may be subject to capital gains tax. Conversely, transfers intended as compensation for services are subject to income taxation, but not capital gains tax.here the gift which was given by Manisha to Batrisya is truly gratuitous even though it was given for the help she had done,It can't be argued as Compensation paid becuase Manisha is not under obligation to pay her or gift her it was just out of gratuitous,so it should not be treated as ordinary income and it should taxed for the capital gains as per provisions of legislature i.e she would be liable for the capital gain tax of =$2000-$800=$1200

But CGT on antiques i.e which was included in chattels was exempted from CGT if the was not traded so the sale/transfer would n't be under the purview of the CGT

Truly gratuitous transfers are not considered income to the recipient, but may be subject to capital gains tax. Conversely, transfers intended as compensation for services are subject to income taxation, but not capital gains tax.here the gift which was given by Batrisya to Manisha is truly gratuitous and hence not included in the Ordinary income of the Batrisya Artwork are not under the purview of CGT they are exempt from the capital gain tax if they are not traded so,there would be not capital gains

All the best for semester

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