Tax Issues

Eric Waterhouse is a lawyer in sole practice who operates in the Adelaide
metropolitan area. Eric employs 3 lawyers and one secretary/receptionist. He has
provided you with the following details for his 2011 tax return.

For the year ended 30 June 2011, Eric received cash from clients for legal work
totalling $875,000. Outstanding debtors of his legal practice at 30 June 2011 were
$90,000 and were $85,000 at 30 June 2010.

Eric also tutored in employment law at university for which he received $5,000 in the
2011 year. He also performed $500 worth of exam marking in June 2011 for which he
received payment in July 2011.

In order to help the environment, and receive some extra cash, Eric installed solar
panels on the roof of his house. These were installed on 15 December 2010 at a cost
of $11,000. Eric did not receive any government assistance in the form of grants or
subsidies for this purchase. In March and June 2011, Eric received cheques totalling
$50 and $100 respectively from the electricity company for electricity generated from
his solar panels that was put back into the electricity grid.

Eric owns shares in a two public companies. One company paid Eric a $700 dividend
in April 2011 that was franked to 50% while the other paid Eric a $1,000 dividend
that was unfranked in June 2011.

One of Eric’s clients was so happy with the legal work that Eric performed for her
that in December 2010 she paid Eric a $500 ‘bonus’ in addition to the fee that Eric
charged her. She told Eric that he should buy himself a nice Christmas gift with the

Eric loves greyhound racing and often places large bets and approaches his gambling
in an organised manner. He keeps extensive records of race meetings and the form of
greyhounds on his computer. He purchased a half share in a greyhound which
achieved some success on the racetrack. During the 2011 year he won $30,000 and
lost $12,000 on all bets he made. His share of prize winnings amounted to...