Tax Law

BLO2206: Tax Law & Practice
Assignment

Question 1:

a) As a result of Joanne receiving $5000 for the cancellation of one of her employment contracts, it is deemed to be ordinary assessable income. The reason that it is ordinary assessable income, is because the payment was for income that Joanne had lost, upon one of her contracts being cancelled. Furthermore, since Joanne also had another employment contract in which she was receiving income, she relied upon those payments to base her lifestyle. In other words, the compensation payment covered the amount that Joanne was going to receive throughout the six month period, even if one of her contracts was not cancelled.

The compensation payment of $5000 was convertible into cash, which further emphasizes the fact that the payment is assessable income, under the ordinary usage of the word. The only time that the compensation payment would not be ordinary assessable income, is under Section 26(e) of the 1936 act, ...