However, some of these outgoings may fail one of the negative limbs - the second one (private or domestic) in particular. However, there are a number of limited cases where a deduction will be allowable, and some of these exceptions may be applicable to James. Section 8-1(2)(a) 15 Negative - Capital in Nature An expense will be denied if it is capital, or of a capital nature; Test 1: Does the expenditure provide an 'enduring benefit' to James? Test 2: Will the expenditure only be incurred 'Once and For All'? Assess whether any of the expenses incurred by James satisfy test 1 or test 2 and will therefore be capital in nature. 3" Negative - Relating to exempt income Assess whether any of the expenses incurred by James relate to exempt income (hint: the list for exempt income is in s11-15 ITAA97). 4" Negative - Specifically not deductible Are there any provisions in the Act to deny a deduction? Section 8-1(2)(b) 2"d Negative - Private/Domestic You cannot deduct a loss or outgoing under this section if it is private or domestic in nature. For each of the expenses that passed one of the first positive limbs and have not failed any of the negative limbs so far, you need to discuss if they will be private or domestic in nature. Refer to relevant legislation and case law for each item and apply the facts to the law. Note: that some items will relate to the same Division of the ITAA97 and it would be easiest to discuss these items in succession