Scott McDonald, who originally hails from Brisbane is a distinguished oncologist and has lived in the US since July 1985.
In May 1985 he purchased an investment property with the proceeds of an inheritance from his grandfather’s estate. The property which cost $AU 85,000 is in the upmarket Brisbane suburb of New Farm. (Before leaving Australia he chose to have the property treated as a ‘Taxable Australian property for CGT purposes’: read- Woellner 7-375)
In September 1990 he married his American sweetheart, Dolly Patten. They have two adult independent children who are also successful in their careers.
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In 2015 Scott decided that after a long and successful professional career, he would like to retire towards the end of 2020. Having been away from Australia for so long, he and Dolly planned to spend most of his retirement years in Brisbane. Under this plan, they would spend eight months in Brisbane and four months in the US each year. The decision to spend four months in the US was to a large extent due to the fact that Dolly was an avid skier and an active member of the skiing club in Aspen, Colorado. Pursuant to this in 2017 they substantially renovated the Brisbane property by adding on a second storey level to the original house. The renovation project which took almost nine months to complete cost them $AU 185,000.
In July 2018 he was engaged on a two-year fellowship program that was sponsored by the Australian Cancer Council. During this period, he was to be paid a fellowship grant totalling $AU 240,000 by the Australian Cancer Council. His medical research had been developed mostly in US where he had established a world class cancer clinic. Under the terms of his contract, he was required to be in Perth for two weeks in September, December, February and May each year to hold meetings with senior executives of the Australian Cancer Council to present his research results. On these occasions, he stayed in serviced apartments in Perth and Sydney, where he also conducted seminars and master classes at clinics and hospitals. He did not usually bring his family along on such trips. However, on his December 2018 trip, Dolly accompanied him to Australia. At the end of the official leg of that trip they decided to spend a one-week holiday in Sydney to coincide with the New Year celebrations. While celebrating the New Year’s Eve at the Star Casino, Scott won $AU 100,000 at the pokies.
In March 2019, Scott received $AU120,000 of his fellowship grant. All these amounts were paid into an Australian bank account and earned $AU 2,000 bank interest.
Sadly, in early May 2019 Dolly was killed in a motor vehicle accident.
Following Dolly’s funeral, Scott abandoned his plan to return to Australia and decided to remain in the US where he could live closer to his children and grandchildren. Because of this decision he sold the Brisbane house on 20 June 2019 for $AU 2,500,000.
i): Scott advises you that he also sold the following assets on 1 June 2019:
• 20,000 shares in a US company: purchased on 1 July 1999 at cost of $ US10,000 and sold for $US 250,000 on 1 June 2019; and
• an investment flat in San Francisco: purchased at a cost of $US 650,000 on 15 July 2018. He sold it on 1 June 2019 for $US 400,000 as the property suffered extensive damage during an earthquake and the property had not been insured at the time.
ii): He also provides you with a statement of account from his US bank showed that he had earned interest of $US 12,500 on his savings account during the year 2019.
Advise Scott on what amounts may be included in his Australian assessable income for the 2018/19 tax year.