Posted: July 27th, 2016

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Three months after the partnership had commenced, a partnership business asset was sold for a capital loss. With expansion of the business it was decided to employ Angela s daughter, Georgina, on a part time basis during peak periods. Georgina served mainly at the counter. For this work she is paid $42 per hour. The business also pays her an allowance for the use of her motor vehicle during work time. The business provided Angela with an all expenses paid overseas holiday to New Zealand and Paul with a lap top computer.

Working part time suits Georgina because it gives her time to devote to her personal training business. In the current financial year she expects to earn assessable income of $6,000. Although Georgina will make a loss this year from the personal training business she is confident that her business will generate profits within 1 or 2 years.

After expressions of concern from Paul about the physical access to the business, the landlord, Ces, agreed to replace the existing balcony and access steps with a pre formed masonry structure. The original access had been made of timber but this had deteriorated over time. The work cost Ces ,000.

Paul plans is to sell his interest in the partnership to Angela s daughter later in 2012. When Paul moves out of the business he will enter into a restrictive covenant in which he will agree not to establish a similar business within a radius of 50 km of the location of the present business. The partners anticipate that Paul will receive $25,000 in consideration for entering into this agreement.

REQUIRED:

You are required to advise each person ie Paul, Angela, Georgina and Ces of the taxation implications of the above activities.

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