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According to the case above, advise Mr. Doolittle as to the deductibility of legal expenses? Case Study You are a chartered tax accountant working in
According to the case above, advise Mr. Doolittle as to the deductibility of legal expenses?
Case Study You are a chartered tax accountant working in Epping, NSW. A client by the name of Mr. Doolittle walked into your office for tax accounting advice concerning travel expenses and legal expenses he personally incurred whilst holding a Chief Executive Officer (CEO) position in a public listed Company titled 'Blue Sphere Pty Ltd. Given his position as a CEO of Blue Moons Pty Ltd, Mr. Doolittle also had to travel to promote his company, at least 1 month in a year to countries such as the United States of America and the United Kingdom. For example, in August 2021, he obtained a general covid clearance from the Australian Government to travel to the United Kingdom to set up a subsidiary business entity in that region. He stayed in London at the Bloomsbury Hotel. The Hotel stay for three weeks was A$13,314 including GST. His return flight fare on Qantas from Sydney to London, business class (Flexible Fare) was A$25,000 including GST. He incurred meals and travel expenses in London for A$10,000 including GST. In his fourth week of his stay in London, he travelled to Manchester to visit his relatives, Uncle and Auntie Rob. When he was in Manchester whilst visiting them, he stayed at the Edwardian Manchester for 1 week, which cost him A$3,318 including GST. Mr. Doolittle informed you that he incurred these expenses for an income producing activity. When he returned to Sydney, he was informed by his secretary about an article that Rolph News published in the newspaper regarding Mr. Doolittle. Mr. Doolittle engaged his lawyers to bring an action in defamation against Rolph News for publishing an untrue statement about him. Mr. Doolittle alleged Rolph News caused harm and emotional distress to him because of the publication in the newspaper. Essentially, Mr. Doolittle sued the media broadcaster, Rolph News over an article published in the newspaper that alleged him as a perpetrator in a historical sexual assault case committed against a former female business colleague in 2010 at Blue Sphere Pty Ltd. The legal proceedings were commenced in the Supreme Court of NSW, however, was settled at Mediation for an undisclosed amount. Mr.Doolittle was invoiced by his legal firm, $750,000 including GST for defending the claim against Rolph News. Subsequently, Rolph News withdrew the article published in the newspaper which included a public apology to Mr. Doolittle. Mr Doolittle informed you that he incurred these legal expenses as part of his income producing structure and not income producing processesStep by Step Solution
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