Taxation Egypt From Augustus To Diocletian

Classification of Eric’s assets

Discuss About The Taxation Egypt From Augustus To Diocletian?

The capital gain or loss that is incurred by an individual needs to be clearly understood in any given scenario to ascertain his or her financial position. In the presented scenario, in the past 1 year Eric has acquired a number of assets such as an antique vase, an antique chair, a painting, a home sound system, and shares in a listed company for different prices. And last week he has sold the same at specific rates. Based on the provided details in the question, the assets were with him for less than a year.

As per theory, when a capital asset is sold, the difference between the cost price of the asset and the amount realized from the sale refers to capital gain or capital loss. The capital gain or capital loss can be classified into long-term or short-term based on the time period for which it was held by an individual. If an asset is held for more than 12 months or 1 year, the capital gain or loss is said to be long-term in nature (Andreas & Markus, 2014). Whereas if the asset is held for one year or less than a year, the capital gain or loss can be termed as short-term in nature. In the presented situation, Eric has been holding the assets since the past 12 months so his net capital gain or net capital loss for the year would be short-term in nature (Barseghyan & Coate, 2016).

The assets that Eric had in the last year can be categorized into two types namely assets that are intended for his personal use and collectibles. The assets that are intended for one’s personal use are the ones that an individual purchases for his own satisfaction and happiness. Out of the assets that were previously acquired by Eric, the home sound system and the shares of the listed company belong to this asset category (Becker, 2015). Collectible can be defined as the asset of limited quantity but whose value is significant. Mostly it includes antiques. The assets that Eric previously possessed and sold in the past week like antique vase, antique chair, and painting can be categorized under collectibles.

Thus in the given scenario, to arrive at the net capital gain or net capital loss of Eric, the sale proceeds have to be deducted from the capital value of the same.

Assets	Cost of Assets	Capital Proceeds of Assets	Difference	Net Capital Gain/ (Net Capital Loss)
Antique Vase	2,000	3,000	1,000	Gain
Antique Chair	3,000	1,000	-2,000	Loss
Painting	9,000	1,000	-8,000	Loss
Home Sound System	12,000	11,000	-1,000	Loss
Shares in listed company	5,000	20,000	15,000	Gain
Total	31,000	36,000
Net Capital Gain/Loss			5,000	Total Net Capital Gain

Calculation of Brian’s taxable value of the fringe benefits for the 2016/17 FBT year

Hence Eric has had capital gain while selling the antique vase and shares of the listed company. The gain together comes to Rs 16,000 /- While selling the other assets like an antique chair, painting, and home sound system, he has incurred a loss of Rs (11,000) /-. Hence the net capital gain that he has gained after the sale process comes to Rs 5,000 /-.

As per the tax laws, the assets for personal use have been sold for over $ 10,000, thus the taxability rules relating to capital gains will be charged on them. Similarly, each collectible item has been sold for over $ 500 so the taxability rules relating to capital gains will be charged (Becker, Reimer & Rust, 2015).

In the given scenario, Brian’s employer has given him $ 1 million as a three-year loan at the special interest rate of 1% p.a. which is to be repaid on a monthly basis. This particular loan scheme comes under the scope of loan fringe benefits that an employee receives from an employer (Bernheim & Scheuer, 2014). That is the reason the rate of interest that has been charged is lower than that of the current market loan interest rate. For the proper and accurate computation of Brian’s taxable value of the fringe benefit, the current statutory rate of interest needs to be taken into consideration (Brownlee, 2016). Since the particular loan was offered in 2016, April 1^st, the applicable statutory interest rate would be 5.65%. In order to calculate the taxable value of Brian’s fringe benefits for 2016/17 FBT year, the following process will have to be followed.

1. In the initial stage, the loan fringe benefit must be ascertained after eliminating the deductible rule. So the actual interest (i.e. at 1.00%) must be deducted from the statutory interest (i.e. at 5.65%).

Interest value (statutory interest rate of 5.65%) = $10,00,000 * 5.65% = $ 56,500

Interest value (actual interest rate of 1.00%) = = $10,00,000 * 1.00% = $ 10,000

Thus the taxable value is the difference between the above two interest figures: $ 56,500 – $ 10,000 = $ 46,500

1. At this stage, Brian has to calculate the interest on the basis of the statutory interest rate i.e. 5.65%. He must assume that this arrived figure is the real interest amount that is payable by him. The interest value based on the statutory interest rate = $ 10,00,000 * 5.65% = $ 56,500
2. As per the question, Brian has utilized 40% of the borrowed funds for income-producing purposes and met all his obligations relating to the interest payments. So now he must calculate the tax-deductible interest expense. The hypothetical situation relating to statutory interest rate is considered: $ 56,500 * 40% = $ 22,600.
3. Now Brian needs to ascertain the actual tax-deductible interest expense: $ 10,000 * 40% = $ 4,000.
4. The actual tax-deductible interest expense calculated by Brian must be subtracted from the hypothetical value: $ 22,600 – $ 4,000 = $ 18,600
5. The final taxable value of the fringe benefits of Brian must be arrived at this stage by deducting the value of the 1^st process by that of the 5^th process: $ 46,500 – $ 18,600 = $ 27,900

If this interest value had to be paid by Brian at the time of the termination of the loan, instead of the monthly repayment scheme, then the specific period of the loan has to be assumed from the particular time when the interest would be payable or paid by him (Drautzburg & Uhlig, 2015). If Brian would have no responsibility to repay the loan interest then the same computation model would be adopted but the interest rate would be considered as 0%.

Allocation of loss on property for tax purposes

In the particular property backdrop, Jack and Jill have borrowed some financial resources to rent and use it as joint tenants. As per the written agreement between the couple, Jack is eligible to receive 10% of the profits from the property whereas Jill is entitled to receive 90% of the profits from the property. As per the stated agreement, in case of loss, Jack has to bear the entire 100% of the loss (Griffith, Miller & O’Connell, 2014). Thus last year when they have sustained a loss of $ 10,000, Jack has to bear the entire burden of such loss Jill will not be having any financial obligation towards this loss. This loss of Jack can be set off with the other forms of income of Jack so that he can determine his net profit or loss of the year. He has one more option in hand i.e. to carry forward the loss for the following years (Henneman, 2015).

If the couple decides to sell off the property, the subsequent gain or loss from it would be available for them. In case there is a loss from the specific transaction, the same has to be incurred by Jack and he has the entire right to carry it forward in the future years or use it in the very year to ascertain his total net profit or loss. Similarly, in case of gain, the particular amount must be distributed between Jack and Jill in the exact proportion that has been stated in the written agreement (Jaimovich & Rebelo, 2017). The ratio decided by the couple for sharing of profits is 1:9 where Jack receives one portion of the profits and Jill receives nine portions of the profit. Jack has the complete right and authority to set off the particular loss against the gain that they would earn by selling of the property.

Thus it can be concluded that Jack is in a position where he has the authority to treat the loss from the property as per his convenience and need. He could set of this loss from the property if he would gain from selling the same (Piketty, Saez & Stantcheva, 2014). If Jack has no gains in the current year then the loss must be borne by him while his wife would not have any obligation towards the loss from the property. The treatment of tax would be insignificant for Jill whereas Jack would have to record such loss in his books of accounts.

Principle established in IRC v Duke of Westminster [1936]

The particular case relating to IRC v Duke of Westminster [1936] is a popular case that has come under limelight due to the particular tax avoidance situation. After referring the case, it can be clearly stated that every individual is righteously entitled to utilize his or her legal rights and benefits to help him minimize his tax that is attached to his total income earned during the year. In layman’s language, it can be stated that if a person adopts fair and legal methods to reduce his total income value and thus reduce his tax value, the Commissioners of Inland Revenue have no power and authority to compel a taxpayer to pay a higher tax amount (Pomeranz, 2015). This particular model is applicable only when a taxpayer uses the fair and honest methods to reduce the amount of tax that is supposed to be paid by him. Fair tools and techniques must be adopted by him in order to reduce his gross income at the end of the year with the purpose to decrease his tax payable amount.

The case is one of the best examples that add value to the taxation model and acts like a breath of fresh air for honest taxpayers. The particular legal case covers various areas including every person who adopts fair strategic methods to manage his books of accounts has the right to take legal assistance to decrease his total income value (Scheuer & Werning, 2017). If the ethical and moral principals are in place and they have not been altered, the person cannot be forced to pay further tax in the process. The use of legal mode by the person strengthens his position in the eyes of the law. So no authority can question the validity of the person’s method since he has the legal backing.

When the particular case was stated in front of the judge, he stated that the effective use of the legal model by an individual to lower his income is a fair technique. The law should stand by it since no ethical aspects have been hampered in the process. This particular rule holds immense relevance in the current times in Australia. It discourages business undertakings to manipulate their books of accounts to have an additional advantage. It even provides the legal right to function a business activity in a truthful manner (Schmitt, 2015). It encourages businesses to use ethical means to strengthen their financial performance instead of altering their books of accounts. Since this principle encourages individuals as well as businesses to operate efficiently it is a valuable case that makes the contribution to the taxation system of Australia.

In the presented situation, Bill has a large parcel of land on which there are numerous tall pine trees. He intends to use it for grazing sheep and so he wants to have it cleared. A particular logging firm is showing its willingness to pay him $1,000 for every 100 meters of the timber that they can take from the land. The first and foremost question that arises in the situation is whether the tax laws are applicable or not for Bill for the money that he would be receiving from the logging business (Thomson, 2015). The given circumstances in the question do not throw light on the fact that whether the receipts that he would receive from the firm could be considered as revenue receipts or not. This high degree of uncertainty shows that the rules relating to the capital gains taxes do not apply to Bill’s specific situation.

If Bill would receive a significant amount of money of $ 50,000 from the logging business to remove the pine trees from his yard, the same amount would be considered as a capital receipt for Bill. The very reason for such treatment is the large value of the finance and the lack of recurring receipts in the situation. In this situation, relevant tax rules would apply to Bill. Thus the nature of the financial transaction between parties has a significant impact on the applicable taxation laws (Wallace, 2015).

So in the mentioned scenarios, the value of the finance involved has a significant impact on the application of taxation law. In the former instance, Bill would be receiving smaller and repeated payments from the logging firm while in the latter situation; he would be receiving a financial figure in bulk and the receipt would be one-time in nature (Scheuer & Werning, 2017). As per the taxation law, when one party is involved in a sales transaction for a specific consideration, the receipt received in the situation is considered to be a capital one and thus it is taxable in the eyes of law. In the first scenario, the taxation would be charged at normal tax rates and they would not be treated as capital gains for Bill.

References

Andreas, O. and Markus, H., 2014. Taxation of income from domestic and cross-border collective investment.

Barseghyan, L. and Coate, S., 2016. Property Taxation, Zoning, and Efficiency in a Dynamic Tiebout Model. American Economic Journal: Economic Policy, 8(3), pp.1-38.

Becker, J., 2015. The Relation of Article 9 Paragraph 1 German Double Taxation Treaties to Domestic Tax Law and the Consequences for Current Value Depreciation under Section 1 Paragraph 1: Foreign Tax Act. Intertax, 43(10), pp.589-594.

Becker, J., Reimer, E. and Rust, A., 2015. Klaus Vogel on Double Taxation Conventions. Kluwer Law International.

Bernheim, B.D. and Scheuer, F., 2014. ECON 242: PUBLIC FINANCE AND TAXATION II.

Brownlee, W.E., 2016. Federal Taxation in America. Cambridge University Press.

Drautzburg, T. and Uhlig, H., 2015. Fiscal stimulus and distortionary taxation. Review of Economic Dynamics, 18(4), pp.894-920.

Griffith, R., Miller, H. and O’Connell, M., 2014. Ownership of intellectual property and corporate taxation. Journal of Public Economics, 112, pp.12-23.

Henneman, J.B., 2015. Royal Taxation in Fourteenth-Century France: The Development of War Financing, 1322-1359. Princeton University Press.

Jaimovich, N. and Rebelo, S., 2017. Nonlinear effects of taxation on growth. Journal of Political Economy, 125(1), pp.265-291.

Piketty, T., Saez, E. and Stantcheva, S., 2014. Optimal taxation of top labor incomes: A tale of three elasticities. American economic journal: economic policy, 6(1), pp.230-271.

Pomeranz, D., 2015. No taxation without information: Deterrence and self-enforcement in the value added tax. The American economic review, 105(8), pp.2539-2569.

Scheuer, F. and Werning, I., 2017. The taxation of superstars. The Quarterly Journal of Economics, 132(1), pp.211-270.

Schmitt, N., 2015. Social Norms or Income Taxation–What drives a Couple‘s Labor Supply? Experimental Evidence. Norma, (2/13).

Thomson, W., 2015. Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: an update. Mathematical Social Sciences, 74, pp.41-59.

Wallace, S.L., 2015. Taxation in Egypt from Augustus to Diocletian. Princeton University Press.