Vicentio.pptx - LAW 315 Assessment 2 Group Presentation Bee...

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LAW 315 Assessment 2 Group Presentation
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Bee Chin Chee Phuah Nai Hua Manpreet Kaur Mann Thiveya D/O Shanmuganathan
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1. Dana carries on business as a computer parts manufacturer. Dana mortgages her factory to the Development Bank and uses the borrowed funds to build an extension to the factory. Discuss whether the repayments are deductible to Dana.
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Issue: Whether Dana’s repayment of her capital amount and interest payments are entitled for deduction under s 8-1 ITAA 1997.
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Section 8-1 ITAA1997 gives the “general deduction” provisions, which applies to “losses” and “outgoings” and it has both positive and negative “limbs”.
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In considering the case, it is necessary to consider the types of payment made by Dana as she borrowed funds from the mortgage of her factory: Principal payment Interest payment
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The two positive limbs of the provisions contained in s 8-1(1) ITAA 1997: “You can deduct from your assessable income any loss or outgoing to the extent that: (a)it is incurred in gaining or producing your assessable income; or (b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.”
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In this case, Dana could not deduct the principal payment because it was not a necessity for her to extend the factory in carrying on a business which is stated under s 8-1(1)(b).
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