Question2 State whether the following would be as an allowable deduction against

Question

Question2 State whether the following would be as an allowable deduction against assessable income. Provide a justification for your argument based on statute and case law a) Provision of doubtful debts of $4,200 for a detective agency (2 marks) b) Fines paid by a builder for driving an unregistered vehicle (2 marks) c) An amount of $1,000 paid to a solicitor for preparing a partnership deed. (10 marks) (2 marks) the employer. (2 marks) and investment matters. (2 marks) d) Travel cost of a business executive to attend a trade fair in Munich paid by e) Newspapers purchased by an accountant who advises clients on financial t ut Fram T1 2018 EP1

Explanation / Answer

a. Provision for Doubtful Debts of $ 4,200 for a detective agency:

This is not an allowable expense. Provisions do not represent actual losses. Actual bad debts are allowable expense.

b. Fines paid by a builder for driving an unregistered vehicle.

Fines and penalties paid will not be an allowable deduction against assessable income, since they are levied on the assessee for committing unlawful acts. Allowing this deduction would amount to condoning of an illegality.

c. An amount of $ 1,000 paid to a solicitor for preparig a partnership deed.

This is in the nature of a capital expenditure, and as such is likely to be disallowed.

d. Travel cost of a business executive to attend a trade fair in Munich, paid by the employer.

This is a legitimate business expenditure, and would be allowed as a deduction in computing the assessable income of the employer.

e. Newspapers purchased by an accountant who advises clients on financial and investment matters.

The cost of newspapers would be allowed as a deduction against the assessable business income of the accountant, as this expense was incurred in relation to the revenues of his business/ profession.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.