Taxation Consequences for Sophie

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Author Note

TAXATION1
Taxation
Name of the Student
Name of the University
Author Note

TAXATION2
Question 1
Taxation Consequences for Sophie
Issue
The concern accruing from the instant scenario are as enumerated below:
• Whether any damages in form of a lump sum for compensating the potential loss
perpetrated upon the reputation has a tax effect for Sophie.
• Whether compensation devolved upon against the earning loss at the time of
replacements in relation to the machine accrues any tax effect for Sophie.
• Whether the received reimbursement in relation to legal fees that has been paid has a tax
effect for Sophie.
Rule
The legal principle laid down by the judgment delivered in the matter of Whitaker v FC of T 98
ATC 4285 that requires every amount earned in way of compensation conceived to mitigate personal
injury demands to accrue a tax effect under the system of Capital Gain and this requires treatment in the
form of CGT gain.
The legal principle laid down by the judgment delivered in the matter of FC of T v Sydney
Refractive Surgery Centre Pty Ltd 2008 ATC ¶20-081 obligating every receipt vested upon an individual
in relation to reputational loss caused requires to be given extended with a treatment under taxation in the
CGT system and needs consideration as a CGT asset. This concept flows from has been a continuation of
the contention that reputational loss occurred to an entity would make him suffer the ability of the venture
to generate profit having the potential to be dealt under taxation.

TAXATION3
The legal principle laid down by the judgment delivered in the matter of Allied Mills Industries
Pty Ltd v Commissioner of Taxation [1989] FCA 135 every compensation which a taxpayer is devolved
with respect to a damage that has been suffered by him requires treatment in the system of tax in a similar
way as the item that was made to be replaced with such compensation.
The legal principle laid down by the judgment delivered in the matter of Phillips v Federal
Commissioner of Taxation [1947] HCA 50 every amount that the taxpayer obtains as compensation that
was devolved upon that taxpayer in return of the event making him lose as well as deprive him from the
earnings that requires dealing as assessable earning.
According to the principle contained in section 6-5, ITA Act 1997, every compensation accrued
to the individual in relation to any damage that requires treatment in the form ordinary earning towards
taxpayer as well as to be assessed accordingly.
The legal principle laid down by the judgment delivered in the matter of HR Sinclair & Son Pty
Ltd v FC of T (1966) 114 CLR 537 every sum that is obtained by the individual by the way of
reimbursement of an expenditure, requires treatment in the form of deduction towards taxable earning,
would be recognized itself as CGT gain and the taxability of that amount should be made as statutory
income.
The legal principle laid down by the judgment delivered in the matter of T v Rowe 97 ATC 4317
every expenditure made by way of legal fee needs recognition as permissible deduction towards taxable
earning of the person paying the tax. The reimbursement the individual taxpayer receives against that
legal fees should be treated as compensation as against the expenditure caused to the taxpayer as well as
is needed to be permitted as deduction. As a compensation, the reimbursement would need treatment as
CGT gain.
Application