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John and Alice are in a partnership as retailers of electrical goods. The partnership records, exclusive of GST, for this income year disclose:

Receipts ($):
300,000	Gross receipts from trading
Payments ($):
100,000	Purchases of trading stocks
30,000	Partners' salaries (each)
2,000	Interest on cash advance made to the partnership by John
60,000	Salaries for employees and rent paid
2,000	Legal expenses in recovering bad debts

Other details:

• John and Alice share partnership profits equally

• Trading stock on hand 1 July: $10,000

• Trading stock on hand 30 June: $20,000

• John's personal records disclose:

• Gambling winnings: $2,000

• Net salary as a part-time instructor (excluding PAYG tax instalments of $2,000): $5,000

• Subscription to professional journals: $500

• John is a member of a private health fund.

Calculate John's taxable income for the income year explaining your treatment of each item in this question.

Solution:

(1) Net income of the partnership:

	$
Assessable income:
sales: s 6-5 ITAA97
excess of closing trading stock over opening stock: s 70-35 ITAA97
Deductions:
- purchases of trading stock: s 8-1 ITAA97
- partners salaries: not deductible: Scott
- interest on cash advance: s 8-1 ITAA97
- employee salaries & rent: s 8-1 ITAA97
- bad debt recovery expense: s 8-1 ITAA97
Net income of partnership	=

The amount available for distribution is $................. (being, the net income of the partnership of $................ less salary paid to John and Alice of $................).

(2) Johns taxable income:

	$
Assessable income:
share of partnerships net income ($86,000 x 50%): s 92 ITAA36
partners salary
interest on cash advance: s 6-5 ITAA97
gambling win: not ordinary income
salary as part-time instructor: s 6-5 ITAA97
Deductions:
- professional journals: s 8-1 ITAA97
Taxable income	=

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