James established a legal practice in Geelong specialising in company law. James unintentionally gave incorrect professional advice to a client which resulted in the client being fined by the Australian Securities Commission. The client took legal action against James to recover the fine plus compensation for his embarrassment at being fined. James agreed to pay the client $10,000 in compensation plus he incurred $1,000 in legal costs. Advise James if he can claim the compensation he paid the client and the legal costs he incurred as an allowable deduction. Make reference to case law and/or relevant sections of the Income Tax Assessment Act.b) Joan is a qualified accountant working in the head office of a large corporation and has incurred the following expenses. Joan is a sole parent and so, to enable her to work, she has to leave her daughter at the local child minding centre which costs $2,000 a year. Joan's employer requires her to dress appropriately at work. Joan prefers to dress casually while coming to and from work each day changing into her work clothes when she arrives at the office. She spent $2,000 on a designer suit. To enable her to collect her daughter on time and meet work deadlines she often has to use a taxi to get to the child minding centre on time at an annual cost of $500. Joan also uses the taxi to travel from the company's head office to branches around the city at a cost of $800. She is not reimbursed for this expenditure. Joan is planning to become a financial journalist and is undertaking a one year course in journalism. The total tuition fee is $4,000 and text books cost $300. Joan made a number of work related telephone calls to her employer's clients using her own mobile phone. Her employer doesn't reimburse her for these calls that had cost Joan $1,200. For the year ended 30 June 2014, advise Joan what amounts she can claim as an allowable deduction with reference to case law and/or relevant sections of the Income Tax Assessment Act.Chloe commenced business as an investment advisor on 1 January 2014. On the same date she commenced speaking regularly on the radio providing investment advice to the listeners. Chloe has asked you to prepare her income tax return for the year ended 30 June 2014 and provides you with the following information. Details of Chloe's income for the income year ended 30 June 2014 are: $ Gross income from her investment advice business (cash received to 30 June 2014 was $110,000 and invoices issued in the same period totalled $120,000) Appearance fees from the radio station for providing investment advice (cash received to 30 June 2014 was $20,000 with a further $2,000 owing to her but not yet received) Dividends from an Australian resident company (fully franked) 1,400 Dividends from an Australian resident company (60% franked) 700 Profit from the sale of her investment property: Purchased on 20/10/2010 for $160,000; Sold on 10/07/2013 for $170,000 10,000 Loss from the sale of shares: Purchased on 12/05/2013 for $30,000; Sold on 30/03/2014 for $10,000 (20,000) Details of expenditure relating to the Investment Advisory business of Chloe for the income year ended 30 June 2014 are: Parking fines incurred when visiting client's premises 500 Rent of business premises 18,000 Provision for expected bad debts 5,000 Interest on a loan ($10,000) used to make payments of her income tax (PAYG) The loan was obtained on 1 April 2014 and has to be repaid by 30 April 2015 600 Hire of a boat on the Yarra River to launch and promote her new investment advisory business to invited wealthy prospective clients. 8,000 Food and wine consumed at a promotional launch on the boat 5,000 Chloe maintains a home-office study which is 3 squares of her 18 square family home - Interest payments on the home loan were $12,000 - Heating and lighting expenses at the family home were $2,400 - Depreciation of home-office fixtures & fittings were $1,500 15,900 Legal costs incurred: - Checking of registration documents submitted to government authorities to start her investment advisory business: $4,000. - Pursuing clients who owe her money for work that she has done for them: $1,000 5,000 Page 5 of 20Swinburne Higher Education Exam TP 3, 2014 ACC30005 – Taxation Calculate Chloe's taxable income for the year ended 30 June 2014 explaining the taxation treatment of each of the above items of revenue and expenditures. Justify your answer with reference to relevant case law and/or sections of the Income Tax Assessment Act. (Note the calculation of her tax payable is not required).