KEDIS & KEDIS (No.2)

The parties in this matter were the applicants, Kedis and Kedis (No.2), and the respondent, the Commissioner of Taxation. The dispute concerned the deductibility of certain expenses claimed by the applicants. The proceedings were heard in the Federal Court of Australia.

The primary legal issue before the Court was whether the expenses incurred by the applicants in relation to the acquisition and holding of shares in a company were deductible under section 8-1 of the *Income Tax Assessment Act 1997* (Cth). This involved determining whether the expenses were incurred in gaining or producing assessable income, or were necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

Hartnett J considered the nature of the expenditure and its connection to the applicants' assessable income. His Honour applied the principles established in cases such as *FCT v. Finn* and *FCT v. Janmor*, focusing on whether the expenditure had a sufficient nexus to the derivation of income. The Court found that the expenses were not deductible as they were not sufficiently connected to the derivation of assessable income, nor were they necessarily incurred in carrying on a business for that purpose.

The Court therefore dismissed the applicants' objection and found in favour of the Commissioner of Taxation.