Due to the painting and receipting, he is unable to advertise for a new tenant until 15 March 2009. John advertises the property until 30 April 2009. Unfortunately, although he has spent $1,000 in advertising expenses, he is having trouble finding a new tenant. He decides that he will install an in-ground swimming pool. Not many houses in the area have swimming pools and he thinks this may encourage tenants. The construction of the pool starts on 15 May 2009, and is completed on 30 June 2009. The cost of the pool was $16,000; and the cost of a pool fence (to meet council requirements) was $1 ,500.
John starts re-advertising the property again once the pool is completed, and spends another $300 in advertising costs. He is successful in finding a tenant – a lease is signed on 15 July 2009, and the tenant moves in on 1 August 2009 (at a rent of $700 per week). From 1 August 2009 to 1 December 2012 the property is rented steadily, with an occasional one-or-two week break between tenants. On 1 December 2012, John decides to sell the property. The market value of the repertory at this time is $950,000. He receives an offer of $880,000 in January 2013.
His real estate agent advises him that he is likely to receive a higher offer if he is willing to keep the property on the market for a bit longer. However, John is anxious to sell the property, and accepts the offer of $880,000. He incurs $2,000 in advertising expenses, $3,000 in legal fees, and $28,000 in agent commission associated with the sale. The contract is signed on 20 January 2013 and settlement occurs on 28 February 2013. John also sold the following assets during the year (you can assume the below assets ere all sold/disposed of on 1 March 2013).
I Asset I Other information I Date purchased I (if required) I | 5,000 Shares in BBC Ltd I Purchase price II July 2001 Sales price | $7,500 IA ‘antique’ mirror (mace In 1 September 2005 | $15,000 II February 2008 | $8,000 | $22,000 I Car(2008T0Y0ta) I Nil 13 1 . Brokerage fees associated with the purchase were $75 and brokerage fees associated with the sale were $180. 2. Mr. Smith bought the mirror at an antique store in 2005 for $15,000. After doing some more research after purchase, he realized the value of the mirror at the time of purchase was $10,000.
He sold the mirror via the trading post, and incurred $50 in advertising expenses. 3. John gave the car to his nephew. Market value at time of disposal was $11,000. Required: Calculate John’s net capital gain or loss for the year ended 30 June 2013. You can assume apart from the transactions mentioned in this question, he had no other capital gains events for the year and no prior-year losses. Ensure you fully explain your answer. Hint: Remember, to correctly calculate the gain or loss on the sale of the house, you need to calculate what deductions would have already been claimed.