MLC301 Principles of Income Tax Law - Question/Answer

 Question 3 (4 points)

Consider whether Sam has any assessable income as a result of the sale of her hats (4 marks).
Sam works full time as a doctor but on the weekend she loves attending racing carnivals in Victoria. She always takes great pride in the different hats she wears. She frequently sells her hats from the year before, to pay for her newest hat to wear. This year, Sam decided that she also wanted to restore old hats for other people to purchase to wear to the races. To do this, she commenced shopping at op-shops each Thursday to find old hats. She would then restore them and list them for sale on eBay. She buys the necessary equipment and products and sets up a storage area in her home. She spends about 10 hours a week on hat restoration. She does not advertise but relies on word of mouth. Sam has listed and then sold approximately 100 hats this year from which she received $5,000.