taxation law

Professor Pomfrey, who has her main home and consulting business in Australia, is a long-term investor, who ordinarily makes substantial capital gains on the various sales of listed shares. On the 15 June 2019, Professor Pomfrey sold a parcel of shares in Trust Bank that resulted in a capital gain of $120,000. However, because of a downturn in the stock market, the market value of her Allied Bank shares was substantially less than its reduced cost base.

On 25 June 2019, Professor Pomfrey had a meeting with her tax financial adviser, Mit Marvoelous, who suggested to her that she sell all of her Allied Bank shares, and thereby create a capital loss in the current year, so as to offset the capital gain. Professor Pomfrey believes that the Allied Bank shares are a good long-term investment, however she is willing to take Mit’s tax advice and sell the Allied Bank shares, which she did, on the 27 June 2019.

The capital loss created by the sale of the shares in Allied Bank fully offset the $120,000 capital gain. Professor Pomfrey intends to repurchase the same volume of Allied Bank shares very soon after the 30 June 2019.

Required:

a) Advise Professor Pomfrey on the primary tax implications associated with the sale of the Allied Bank shares. Support your advice with succinct reasons based on relevant legislation, case law and tax rulings. (20 marks)

b) Critically consider, briefly, how, if at all, the tax implications associated with the scenario would change, if Professor Pomfrey was a non-resident of Australia for income tax purposes. Your answer should further consider the implications, if any, for Mit were his advice to remain the same in the scenario as modified here in part b. (10 marks)