The AAT has affirmed the Commissioner’s disallowance of a deduction claimed by a taxpayer for losses incurred in his investment in an NBL basketball team.
The taxpayer had invested in an NBL basketball team by way of acquiring shares and by way of what he described as a loan. In his income tax return for the 2010 year, the taxpayer claimed the $350,000 loss as a deduction against his assessable income. The Commissioner disallowed the claim.
The taxpayer claimed the loss under s 8-1 of the ITAA 1997, on the basis that the contributions were incurred in gaining or producing his assessable income. The taxpayer, who the Tribunal said was an experienced businessman, claimed he made his investments on the basis that he formed a view that “with my involvement and that of my Colleagues in the Company, we could ‘turn the Club around’. That is we could make it financial[ly] viable and profitable, and as a consequence my investment in the Company would increase in value. My aim was to sell my shares and crystallise this increase in the value.”
However, the AAT said the evidence in support of the taxpayer’s characterisation of the contributions was “unconvincing, and in many respects vague and unspecific”. The Tribunal’s view was that it did not support his claim that the contributions were made as part of a profit-making scheme or undertaking.
(AAT Case [2012] AATA 862, Re Elvy and FCT, AAT, Frost DP and Lazanas SM, AAT Ref: 2011/3354, 7 December 2012.)
[FJM Note: Note also that losses or outgoings incurred to derive an assessable capital gain remain non-deductible under s51AAA of the ITAA36.]
[LTN 239, 10/12]