Part A

The general deduction provision in ITAA97 sec. 8-1 allows a deduction for a loss or outgoing to the extent that it is:

(1) incurred in gaining or producing your assessable income; or

(2) necessarily incurred in carrying on a business for the purpose of gaining or producing the taxpayers assessable income.

However, even if the first or second limb is satisfied, a deduction is not permitted under sec. 8-1 to the extent the loss or outgoing is:

(i) capital or of a capital nature.

(ii) private or domestic nature.

(iii) incurred in gaining or producing exempt income.

(iv) prevented from being a deduction by other provisions of the ITAA97 or ITAA36.

Required:

Explain the relevance of the first and second limbs above and the impact of a deduction not being allowed under parts (i), (ii), (iii) and (iv), using examples and case law decisions to highlight your answers.

(20 marks)

Part B

The taxation legislation also contains a number of provisions that provide deductions for particular kinds of expenditure that dont fall under sec. 8-1 ITAA97. In particular, there are ITAA provisions that relate to expenses incurred with the following categories:

(1) Capital Write-Offs & Allowances

(2) Trading Stock; and

(3) Motor Vehicles.

Required:

Discuss how and why the ITAA legislation operates with respect to deductions for expenses incurred in the three categories referred to above, using examples and reference to ITAA legislation and relevant case law decisions, to support your answer

Part A The general deduction provision in ITAA97 sec. 8-1 allows a deduction for a loss or outgoing to the extent that it is: ) incurred in gaining or producing your assessable income; or (2) necessarily incurred in carrying on a business for the purpose of gaining or producing the taxpayer's assessable income. However, even if the 'first' or 'second' limb is satisfied, a deduction is not permitted under sec. 8-1 to the extent the loss or outgoing is: capital or of a capital nature. private or domestic nature. (ii) incurred in gaining or producing exempt income. (w prevented from being a deduction by other provisions of the ITAA97 or ITAA36. Required: Explain the relevance of the first and second limbs above and the impact of a deduction not being allowed under parts (1), (ii), (iii) and (iv), using examples and case law decisions to highlight your answers. (20 marks) Part B The taxation legislation also contains a number of provisions that provide deductions for particular kinds of expenditure that don't fall under sec. 8-1 ITAA97. In particular, there are ITAA provisions that relate to expenses incurred with the following categories: c) Capital Write-Offs & Allowances (2) Trading Stock; and (3) Motor Vehicles. Required: Discuss how and why the ITAA legislation operates with respect to deductions for expenses incurred in the three categories referred to above, using examples and reference to ITAA legislation and relevant case law decisions, to support your