Question

John owns a convenience shop called City Conv. The following events occurred for John during 2019-
2020 financial year.
1. (i) John incurred legal expenses as he was sued for false advertising.
2. (ii) John purchased new fridge to the shop - $800. In addition, his builder added more space
to the
shop front. This cost him $22,000.
3. (iii) John ordered 1000 new T-shirts with printed City Conv’s logos for marketing purposes.
These costs
him $1,500.
4. (iv) John received a City of Sydney fine for putting his sales item for display outside his shop
without
a permit. He required to apply for a permit to use the footpath.
incurred legal expenses as he was sued for false advertising Required:
With reference to relevant legislation and case law advise John on the assessability
and/or deductibility of above events. (10 m

Answer 1

Answer-

1. In the United States, the federal government regulates advertising through the Federal Trade Commission(FTC) with truth-in-advertising laws, and additionally enables private litigation through various statutes, most significantly the Lanham Act (trademark and unfair competition).

The goal is prevention rather than punishment, reflecting the purpose of civil law in setting things right rather than that of criminal law. The typical sanction is to order the advertiser to stop its illegal acts, or to include disclosure of additional information that serves to avoid the chance of deception. Corrective advertising may be mandated, but there are no fines or prison time except for the infrequent instances when an advertiser refuses to stop despite being ordered to do so.

In 1905, Samuel Hopkins Adams released a series of papers detailing the misleading claims of the patent medicine industry. The public outcry sparked from the articles led to the created of the Food and Drug Administration in 1906.

In 1941, the United States Supreme Court reviewed the Federal Trade Commission v. Bunte Bros LLC, under Section 5 in regards to Unfair or Deceptive Acts or Practices.

In 2013 and 2014, the United States Supreme Court reviewed three false advertising cases: Static Control v. Lexmark (concerning who has standing to sue under the Lanham Act for false advertising), ONY, Inc. v. Cornerstone Therapeutics, Inc., and POM Wonderful LLC v. Coca-Cola Co..

State governments have a variety of unfair competition laws, which regulate false advertising, trademarks, and related issues. Many are very similar to that of the FTC, and in many cases copied so closely that they are known as "Little FTC Acts." These laws also go by the terminology "Unfair, Deceptive, or Abusive Acts and Practices" Laws (UDAAP or UDAP Laws) and can vary widely in the degree of protection they provide to consumers, according to the National Consumer Law Center.

2. Purchase of Assets for the business is exempt from Income Tax because generally asests are liable to sales tax.

3.

Advertising Expenses You Can Deduct

You may deduct expenses for advertising your business to customers. It's important to note that these must be ordinary and reasonable expenses for advertising. Some examples would be the printing of business cards, placing a Yellow Pages ad, running newspaper, TV, and radio advertisements (including production costs), and the costs for setting up your business website.

Expenses for Promotion Activities

4-Expenses like sponsoring local events, special events to bring people to your business, publicity costs.