60.1K

Verified Solution

Link Copied!

Six case studies follow:

Donald Duck

Donald Duck, the local hairdresser, paid damages to two of his customers, namely, Mickey and

Minnie. Both are suffering as a result of his faulty equipment.

$-$ Mickey was burnt by a hairdryer, while

$-$ Minnie suffered an electric shock $(3)$

Bold and Grey

Bold and Grey, a firm of attorneys, paid compensation to a client for the maladministration of a

deceased estate. $(3)$

Hyper Store

Hyper Store remained open on a public holiday. It was subsequently fined for trading. Mike

Singh, its proprietor, was also fined for contravening price control regulations. $(4)$

Barry Alan

Compensation was paid to one of his customers by Barry Alan, the owner of a dry$-$cleaning

business, for the loss of two suits that had been entrusted to his care by this customer. $(2)$

Hard Hats Construction Limited

Ten years ago Hard Hats Construction Limited erected a block of flats for a client in accordance

with the client$$s specifications. The block was completed and handed over to the client. The

contract consideration was settled in full.

$4$

During Hard Hats Construction Limited$$s $2016$ year of assessment the external walls of the block

revealed dampness. It was then discovered that the walls had not been built according to

specifications. Its client instituted an action against it for damages. It then settled the damages.

$(4)$

Jake Black

Jake Black is involved in the retailing of gas and petrol lamps. He recently sold a lamp to Rover

Smith under a guarantee. This particular lamp exploded causing injuries to Rover Smith. He then

paid damages to Rover Smith. $(2)$

Presentation $(2)$

Required

In each of the above situations, determine, giving full reasons, whether the expenditure would be

deductible from the respective taxpayer$$s income.

Answer & Explanation Solved by verified expert

See Answer