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Question: the taxpayer 4000 olivesquot is an olive grove that produces...

Question details

The taxpayer, “4000 Olives", is an olive grove that produces olive oil. It operates west of Melbourne, Victoria and is classed as a small business. During the current income year, it acquired an olive processor, which is a machine that presses the olives in the first stage of olive oil production. The purchase price of the machine was $20,000, and “4000 Olives" paid $3,500 for it to be installed ready for use. “4000 Olives" paid for the machine using funds it held in its cash reserves.

REQUIRED:

Advise "4000 Olives” of the tax consequences in regard to the purchase of the olive processor, by answering the following three questions:

1. Examine briefly whether the purchase meets the positive limbs of section 8-1 ITAA 1997. (4 marks)

2. Examine the impact of the most relevant negative limb of section 8-1 ITAA 1997? (6 marks)

3. Analyse whether any other provision may apply, and if so, what claim could be made in the current tax year. (2 marks)

Your answer should include references to appropriate legislation, case law and tax rulings. Disregard GST. You are not required to calculate any claim.

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