Windmill Ltd commenced a takeover of its principal competitor WindPower Ltd in June 2019. The takeover was
Question:
Windmill Ltd commenced a takeover of its principal competitor WindPower Ltd in June 2019. The takeover was hostile and WindPower Ltd fought it vigorously.
WindPower Ltd was under financial stress due to misappropriation of funds by a former employee. This provided Windmill Ltd with the opportunity to mount the takeover.
Legal costs were significant due to the hostility against the takeover.
Just prior to the finalisation of the documentation, the senior management staff of Windpower Ltd won Lotto and were in a position to take over the company and pay off all outstanding debts.
Windmill Ltd spent a total of $1.5 m on the unsuccessful takeover in both 2019 and 2020.
Mr Abbott, the Managing Director of Windmills Ltd, has asked for your advice of how this large expense is to be treated for tax purposes.
This section must be referenced in accordance with the Australian Guide to Legal Citation (AGLC).
Prepare a letter of advice to Mr Abbott explaining how this expense can be treated for tax purposes.
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak