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Anne, Ying and Michael carry on buSiness in a professional partnership. The partnership agreement includes the following provisions:

1. All partners are to be paid interest on their contributed partnership capital at the rate of 5% per annum.
2. All partners are to share equally in the s 90 partnership income, but only AFTER Anne has been paid a salary of $240,000 in recognition of her management of the partnership.

For the year ending 30 June 2023, the partnership accounts show the following (please note, all amounts exclude GST):

Receipts

Fees from clients

Cash dividends (see note 1)

$2,500,000

140,000

Capital proceeds from the sale of land

1,200,000

(see note 2)

$3,840,000

Outgoings

Business expenses including

$1.100,000

Business expenses including depreciation (all deductible)

Salary paid to Anne

Legal fees in relation to the sale of the

land

Interest on partnership capital

Cost base of the land that was sold

Interest on loan from Michael (see note 3)

$1.100,000

240,000

15.000

300,000

700.000

10.000

$2,365,000

Page 4:

13

Accounting Profit

$1,475,000

Page 5:

14

Other information:

SBE General Pool opening balance

$1,105,000

Quiz Information

Depreciating assets purchased during the year:

Car

Laptop computers 3 @ $10,000

each

New reception counter

$70,000

30,000

40.000 140.000 New reception counter

40.000 140,000

A

10

Depreciating assets sold during the year

Car (book value $12,000)

Office furniture (book value $20,000)

$15.000

18,000

33,000

Notes - Please read ALL these notes before attempting this question:

Note 1: The dividends were ALL fully franked.

Note 2: The land was purchased by the partnership on 15 July 2012 for proposed future offices of the partnership. Council did not approve their planning application, so they sold the land under an agreement entered into on 4 May 2023. The sale contract was settled on 26 July 2023.

Note 3: To fund the partnership's working capital, on 1 July 2022 Michael lent the partnership an amount of $200,000 for a period of 2 years. The interest charged was an arm's length commercial rate of interest.

Required

Citing relevant legislation, case law and Tax Rulings (where appropriate) explain your calculations and calculate the Section 90 net income of the partnership for the year ending 30 June 2023.

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