Social and Behavioral Sciences for Taxation Law - myassignmenthelp

Question: Discuss about theSocial and Behavioral Sciences for Taxation Law. Answer: The contemporary case study is related with the ascertainment of the alternative methods of accounting for the gazebo chairs. The taxation rulings of TR 2006/8 is applicable in this context for valuing the trading stock for the taxpayers under the retail or the wholesale business (Barkoczy 2016). The ruling is applicable in the case of Tony so that the taxpayer can select to price their trading stock in hand at the conclusion of the financial year under cost in respect of the subsection 70-45 (1) of the ITAA 1997. As defined under the subsection 70-45 of the ITAA 1997 it permits the taxpayer to price the item of the trading stock on hand at the conclusion of the year of revenue at cost. It has been stated under the corresponding provision of the subsection 31 (1) of the ITAA 1936 that allows the taxpayers to value their entire article under the cost price (Saad 2014). Similarly, the taxpayers transacting in retail and wholesale industries that worth their trading stock in hand by using the absorption method of costing for the taxation purpose. As stated in the absorption method of estimating the cost must be engrossed for the income tax purpose by including the price of purchase and any direct or indirect method of expenditure concerning the trading stock during the normal course of business in carrying trading stock of tradable nature to the saleable conditions. As held in the case of Philip Morris Ltd v. FC of T79 ATC 4355; (1979) 10 ATR 44 the taxpayer used the method direct costing in to value the trading stock (Woellner et al. 2016). With the help of this approach the cost that is attributed to the trading stock comprises of the cost of resources and the remunerations of those workers that executed the operations during the course of manufacturing. Similarly, the Tony should value the gazebo chairs by using the method absorption costing for income tax purpose by together with the price of purchase and the price of direct and indirect cost that is followed in course of the business operations. Subsection 31 (1) of the ITAA 1936 provides the methods of valuation that is available to the taxpayer at the time of valuing the trading stock in hand following the conclusion of the financial year (Robin 2017). Subsection 31 (2) provides the officer with a option of determining the reasonable fair value of valuing trading stock due to the reason of obsolesce connecting to the trading stock and it is lesser than the value that could be considered to be appropriate under the subsection 31 (1). As evident from the current situation of Tony it is found that reported certain units of the gazebo chairs which had become obsolesce and had a nominal value of $1. In the present context of Tony subsection 31 (2) of the ITAA 1936 the obsolesce represents becoming out of usage, becoming out of date, going outdated represents obsolesce stock (Anderson, Dickfos and Brown 2016). The taxpayer in the present context reported an sum which consisted of the value of the stock that could not be sold. As the over-all regulation, any form of stock, which an individual taxpayer retains on the hand, should attribute certain worth. As held in the case of Australasian Jam Co. Pty Ltd v FC of T(1953) 88 CLR 23 the court in its judgement has stated that the stock that is held by the taxpayer who generally does not transact in items that are obsolete does not possess any selling value under the subsection 31 (1) (Tran-Nam and Walpole 2016). Therefore, an individual taxpayer having any obsolete stock that rests on hand must be valued at its scrap value. Stock can be only valued in respect of the subsection 31 (2) following it has been clearly understood that the specific stock has begun to become obsolete. Because of this, the method of revaluing the stock is usually regarded as the method of writing down the stock (Coleman and Sadiq 2013). At the time of witting down the stock for a just and sensible value the taxpayer might mark a once-off write down. As evident from the current study Tony had reported certain item that will not be sold. Under such context the Tony in the present situation can undertake the method of once-off-writing down stock. Under this method tony can write down only that portion of stock that at the conclusion of the income year that has reasonably become obsolesce and the same will not be sold in the market. The present reading is based on the ascertainment of the issue whether the spare parts will be treated as the trading stock. As obvious from the existing circumstance, it is found that the taxpayer sold and serviced computers. The spare parts that was purchased by the taxpayers formed the part of the business. The taxation ruling of TR 98/8 is dealing with the determination of whether the materials and spare parts that was held by the taxpayer for delivering service constitutes trading stock (Grange et al. 2014). According to the section 70-10 materials and spare parts that is held by the taxpayers with the objective of supply to the customers will be considered as the trading stock inside the normal concept of the word given that the taxpayer performed the business of providing service to the customers. As evident in the present case study the taxpayer performed the business activities of selling and servicing computers by replacing the defective parts in the computers that was sold. The selling and replacing of spare parts will be considered as the activities of trading stock in the current context since they are inside the ordinary connotation of the trading stock. The law court in the case of John v. Federal Commissioner of Taxation(1989) 166 CLR 417 has specified the definition of the trading stock (Kenny 2013). The judgement of the high court stated that the materials or the spare parts will be considered as the trading stock for the purpose of income tax given that they are inside the connotation of the word devoid of the help of the definition which represents trading stock in ordinary sense. The stock in the current context are not held for permanent purpose and it is generally held on hand for probable future requirements of the customers. As held in the case of Inspector of Taxes v. Higgs[1974] the term trade is generally put into use to signify the functions of the marketable aspects through which the dealer delivers the consumers for return of some form of goods or services (Krever 2013). Citing the reference of FC of T v. Suttons Motors (Chullora) Wholesale Pty Ltd(1985) in the present context, spare parts retain the character or nature as the necessary part of the service that is within the meaning of the trading stock and these things are regarded as trading stock. On the other hand, if the taxpayer only leased the computers to the others and made use of the spare parts to remedy the defect of the leased computers would also constitute to be a portion of the trading stock within the ordinary connotation of section 70-10 (Morgan, Mortimer and Pinto 2013). The taxation ruling of TR 93/20 defines that there should be an association among the property and the business where an assertion can be bought forward by stating that the property holds the depiction of one or additional of the kinds innumerate not in overall sense however in particular relations to the commerce that is performed. In order to consider the property that is being traded as the trading stock there should be an asset of the occupational of dealing in that stock. The business of the computer supplier in the present context was engaged in the activities of the servicing and retailing computer equipment both in the form of sale and maintenance of the computer equipment along with the replacement of the faulty portions (Woellner 2013). The theory of trading stock as defined by the court of law in the case of Memorex that do not needs a suppliers only occupational to be trading in the spare parts in order to establish parts as the trading stock. In spite of the fact that the computer supplier in the present case entered in the business of leasing and maintenance agreements that might adequately be considered as the agreements for labour and materials instead of considering the same as the contracts for sale of goods. This cannot be considered as adequate to accomplish that the spare parts does not establish as the trading stock. In spite in the current scenario the taxpayer leased the computers but replacement of the defective parts as interpreted by the federal court represents trading stock. The taxpayer traded in the goods that are claimed as the part of trading stock and replacement of spare parts to remedy the defect will be constitute in the present context as the trading stock. Reference List: Barkoczy, S., 2016. Foundations of Taxation Law 2016.OUP Catalogue. Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers view.Procedia-Social and Behavioral Sciences,109, pp.1069-1075. Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016.Australian Taxation Law Select: Legislation and Commentary 2016. Oxford University Press. ROBIN, H., 2017.AUSTRALIAN TAXATION LAW 2017. OXFORD University Press. Anderson, C., Dickfos, J. and Brown, C., 2016. The Australian Taxation Office-what role does it play in anti-phoenix activity?.INSOLVENCY LAW JOURNAL,24(2), pp.127-140. Tran-Nam, B. and Walpole, M., 2016. Tax disputes, litigation costs and access to tax justice.eJournal of Tax Research,14(2), p.319. Coleman, C. and Sadiq, K. (n.d.). 2013Principles of taxation law. Grange, J., Jover-Ledesma, G. and Maydew, G. (n.d.).2014 principles of business taxation. Kenny, P. (2013).Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths. Krever, R. (2013).Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters. Morgan, A., Mortimer, C. and Pinto, D. (2013).A practical introduction to Australian taxation law. North Ryde [N.S.W.]: CCH Australia. Woellner, R. (2013).Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.