Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Question 9.5

No description
by

sl s

on 22 September 2014

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Question 9.5

First Offer
A lump-sum payment

of $10,000
Give up

future claims to the copyright and royalties.

Second Offer
10%

of the sale price of each book sold
Assignment copyright
in the book to the publisher fo
r
10 years.

First Offer
Second Offer
First
book of his experience
(a hostage of a terrorist group)
Question 9.5
HBC331N
Presentation


Received periodically & regularly
Relied upon or expected
Earned from letting the buyers to enjoy every knowledge or usage (intellectual property)
Replacement of income
Four Main
Characteristics of Ordinary Income
Royalty
Taxpayer:
Assignment of copyright - when a copyright is transferred from the owner to another person or party
Receive

10%
of the sale price of each book sold
With
copyright
in the book to the publisher for 10 years
Results as a

revenue receipt
and assessable as
ordinary income


Four Main Characteristics of
Ordinary Income
There is
no royalty
in this case because the amount receive by taxpayer
was not related
to the
quantity of the books sold
. It is
Capital in nature
Hence, the payment received is a capital receipt due to the sale of right.

S15-20 ITAA 97
Ex case: Stanton V FCT (1955) 92 CLR 630
Royalty
Royalty
Royalty
1) Received periodically and regularly
lump sum payment of $10,000
2) Relied upon or expected
1st element did not fulfill,2nd element will not fulfill too.
3) Earned

He was
give up
all right of the book to the publisher
(not intention to earn money)
(through selling of intellectual property)

Disposed
the source of income
4) Replacement of income



Four
Main Characteristic of Ordinary Income
1st offer: Statutory Income
1st offer:Statutory Income
2nd offer: Ordinary Income
2nd offer: Ordinary Income
2nd offer: Ordinary Income
Conclusion
Group member: Sim Siew Ling (4235622)
Kong Sheau Woan (4236564)
Ng Sing Yee (4235193)
Bong Ki How (4235401)
Ling Hoe Yin (4234979)
First Offer: Statutory Income

Lump-sum payment $10,000- Capital Receipt, Statutory Income.

Flow concept
>>
Having nexus
with earning source.
- Nexus between lump sum payment & copyright
from the book.

>> It is not being severable from its earning source.
- Gain
cannot
be extracted without affecting the
underlying earning source.
(Statutory Income)
(Ordinary Income)
First Offer:
Under the first offer, the client will have to give up his copyright and royalty by selling
the intellectual property to the buyer. The receipt will be regarded as a capital receipt and
will be assessable as a statutory income (S 102-5 (1) ITAA97; Stanton). The receipt is
subject to capital gains tax. The receipt is a capital receipt because the income (lump sum
payment) cannot be extracted without affecting the underlying earning source. Besides
that, the amount received by the taxpayer is not a royalty because it does not relates to
the quantity of the intellectual property sold. Once an amount is not a royalty then it will
not constitute an ordinary income as 4 of the characteristics of the ordinary income are
not been shown.

Second Offer:
It is known as ordinary income. It is because it fulfilled all the characteristics of ordinary
income. He received the 10% of the sale price periodically and regularly. The money
received is expected. It was earned from intellectual property.The amount received by
the taxpayer constitute a royalty as it is related to the quantity of the books sold.
Royalties that exploit the intellectual property will constitute an ordinary income
(s 6-5 ITAA97; McCauley)


Amount received by the taxpayer constitutes a
royalty
Related to the quantity of the books sold
Royalties exploit the intellectual property will constitute an
ordinary income
(s6-5 ITAA97)

Ex. Case: McCauley
Questions:
1.) If the client is an experiences writer, will it makes any different in 1st offer and 2nd offer?

2.) What is the different cases between Stanton and McCauley?

3.) In the 1st offer, if the payment of copyright is pay twice in a year instead of lump sum payment, will it constitute as ordinary income?

4.) In what circumstances where a taxpayer is paid for his or her physical resources based on the quantity of resources taken?

5.)Why Capital Gain Tax did not apply in 2nd Offer?

S102-5(1) ITAA 97 Subject to Capital Gain Tax
Ex case: Stanton V FCT (1955) 92 CLR 360
1st offer:Statutory Income
Full transcript