Direct Tax Law & Practice


Added on  2020-03-23

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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
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TAXATION LAW1Answer to question 1:Answer to Question 1.1:Issue:The prevailing problem introduces that whether an individual incurring the cost onmoving the machine to the new site will be able to claim deductions specified under the“section 8-1 of the ITAA 1997”.Rule: The rules are section 8-1 of the ITAA The rules for this study is “British Insulated and Helsby Cables v Atherton (1926)”Applications: From the above-defined prevailing issue of cost incurred on the movement of themachine to a new place a person will be disallowed from making allowable deductions in taxreturn. One should note that “Section 8-1 of the ITAA 1997” accordingly specifies that aperson is disallowed from claiming expense that is not related in the production of assessableincome or business proceeds having private or domestic character (Kiprotich 2016). Theproblem statement provides that the cost of moving the machine is capital outlay and suchexpenses are disallowed from being considered as deductions. An evidence of such cost is put forward under the “Taxation ruling of IT 2197”where the cost of moving the machine is observed as capital expenditure and deductions forincome tax is disallowed for such outlay or expense (Chan 2013). The important case laws of“British Insulated and Helsby Cables Ltd v. Atherton (1926)” expenditure taking place at
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TAXATION LAW2the time of moving the depreciable asset is portrayed as unceasing benefit to the asset (Millerand Oats 2016). Conclusion: The argument can be concluded that capital cost are disallowed from being consideredas deductible expense and cost of moving the machine to the new site is prevent fromallowable income tax deductions. Answer to question 1.2: Issue:The problem that has been prevalent in this context is making of claim of admissibleincome tax related deductions defined in context of “section 8-1 of the ITAA 1997” aboutthe revaluating of asset. Rule: The applicable rule in this context is the “Section 8-1 of the ITAA 1997”Application: The problem that has been stated in the context of the situation is the asset revaluationand claiming the deductions that has been allowed in accordance with the “section 8-1 of theITAA 1997”. As evident the cost that is incurred by the individual taxpayer in order torevalue the asset to the effect of insurance cover is primarily occurred from the execution oftrade activities. The cost of revaluation is solely incurred in the deriving the business revenueand therefore such cost can be considered as allowable deductions for the reason that they arenot carrying the nature of domestic, private or capital under the purview of first limb (Preez2016). It is assumed that cost of revaluing the asset to effect insurance cover is cyclicalbusiness cost and such is incurred in generating the business revenue. Furthermore, an
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TAXATION LAW3assertion can be bought forward that the cost incurred possess significant association with thetaxpayers business functions and does not constitute capital or private expense. Conclusion: Arguably, the cost of revaluing asset in order to effect insurance cover is a recurringbusiness cost. Therefore, such cost forms the part of the income tax deductions. Answer to question 1.3: The prevailing circumstances is associated with determining the deductibility of thelegal cost a person incurs for opposing the petition of winding up. Rule: The applicable rule in this context is the “Section 8-1 of the ITAA 1997”The applicable case laws legislation in this issue is the “Sun Newspapers Ltd v F C ofT (1938)”Applications: The above stated problems statement is concerned with the deductibility of the legalcost that a person incurs for opposing the winding up petition. In order to obtain an incometax deductions for legal expenses or outgoings, in important considerations is to paid inunderstanding the nature of such cost under “Section 8-1 of the ITAA 1997” (Atkinson andStiglitz 2016). The character or the feature of the legal expense carries a benefit that is soughtby the taxpayers for the expenses incurred. An important consideration of the “Section 8-1 ofthe ITAA 1997” is that when individual taxpayers in the process of gaining or derivingbusiness revenue occur a legal expenditure then such legal expense is regarded as admissibleincome tax deductible expense.
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