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.The gift of antiques by manisha to batrisya was truly gratuitous even thought it was gift because of the help she done for her,manisha is not obligated to pay anything or gift because if her help,so it should not be considered as the transfer for rendering the services and the income is not ordinary income under the hands of Batrisya then it might be the Capital gain income for her ? yes it is subject to the capital gain i.e $2000-$800=$1200

she wil also have the indexation benifit for the asset she acquired

Or But as per the legislation is it is exempt from te tax if it was traded .i.e no CGT is leviable for her as she is not trading wit the antiques.

-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 by Batsisya to Manisha was only a gratuitous transfer so it not shall not be added to the ordinary income of manisha and trading of organic goods does nt comes under tradeing of artwork so the CGT is also not leviable on this

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