Need help with d)

Context: Regal Estate Ltd (REGAL) owns and operates a major real estate agency in Sydney. REGAL manages rental properties for owners of investment properties. REGAL usually charges a specified commission as a percentage of rent for these property management services. REGAL also sells properties for owners and conducts auctions for sellers. REGAL also usually charges a specified commission for these services. The company accountant Arthur is in the process of preparing the income tax return for the company for the 2021/22 income year, and seeks your advice on the following matters:

d) REGAL became involved in a dispute with a former client (seller of property) about the sale price obtained by REGAL in relation to the sale proceeds obtained from a previous sale of a property. The former client claims that REGAL convinced her to sell her property at a price which was $90,000 below what she could have obtained. REGAL rejected this claim on the basis that the market values of properties in the relevant area only increased sharply, after the sale of the former clients property. The former client is seeking $90,000 in damages and the return of $3,500 of the allegedly overpaid commission which she paid to REGAL on the sale of the property. The matter has not gone to court yet but REGAL has already paid $9,000 in legal expenses to a solicitor in defending the legal action.

Advise REGAL and Arthur regarding the income tax implications arising from the above facts in relation to the 2021/22 income year. In your answer make sure you refer to any relevant cases, legislative provisions, tax rulings and principles of tax law.