Lecture 2

Question 1

What is chattel?

What is a wasting asset?

Now what is wasting chattel?

Answer 1

Chattel = something you can touch
E.g table, painting

Wasting asset = something that’s life is 50 years or less

Wasting chattel = something you can touch and life exppenctancy is 50 years or less.

Question 2

What are tax rule for selling chattels?

Answer 2

1. If you sell if 6,000 or less you DONT PAY CGT
   - its called chattel exemption
2. If you sell if for more than 6,000 you might pay capital gains tax but there is a limit . The formula is:
   5/3 x ( sale price -6,000)

Question 3

E.g using gifts and market value

Micheal sold antique furniture for 6,360 and he paid 320 to sell it

He got the furniture as a gift in 2017 and market value was 5,500

How do you know how much tax he pays

Answer 3

1. 6360-320 =6,040 so thats how much he actually got.
2. Use market value (5,500) when there is gifts
   6,040-5,500=540 ( gain)
3. Check cap
   5/3 x ( 6,360 - 6,000) =600 ( tax)

If the gain is smaller than cap you pay the smaller amount ( gain ) however if it higher than the cap you pay that caps money.

Question 4

What if you only sell a part of chattel?

E.g jack bought an item back in 2018 for 3,500
- in 2024, he sells 1/3 of it for 2,000
- the value of the other is 2/3 is worth 5,000

How do you do part disposal?

Answer 4

A / a +b x original cost

A = amount sold : 2,000
B = value remaining : 5,000
Original cost : 3,500

2,000 / 2,000 + 5,000 x 3,500 =1,000

Question 5

What if it was a wasting chattel and it was used in machinery or plant
What are some wasting assets are not chattels? - what happens to them

Answer 5

• if it used in business and is plant or machinery then it is not exempt anymore

1.copyrights
2. Patents
3. Short leases
4. Fixed machinery
They are not exempted are TAXED

Question 6

E.g of copyright - something that is taxed

Fola bought a copyright in 2015 for 30,000. It lasted for 25 years. She sells it in 2025 for 35,500

Answer 6

1. How many years was it used?
   2025-2015=10 years
2. Cost per year ( price she bought / years it lasted )
   30,000 / 25 =1,200
3. 1,200 x 10 =12,000 ( cost per year x years)
4. 30,000- 12,000 =18,000 ( minus that from the price she bought it for )
5. Price she sold it at ( 35,500-18,000) =17,500

Question 7

• part disposal : leases
  What if it a long lease?
  What if it a short lease?

Jim bought a property for 299,000
In 2024, he gives Jill a lease and receives 260,000
After this his value of his property is 200,000

Answer 7

1. Long lease = over 50 years = normal tax rule
2. Short lease = 50 years or less = still taxed

E.g answer
1. 260,000 + 20,000=460,000
Lease / total cost x original cost
260,000 / 460,000 x 299,000 =169,000