Assignment Background:
You have recently graduated as an accountant and your first position is with an integrated accounting and financial services organisation in Singapore called Kapunda Teo and Associates Pte Ltd (KT). It is an unlimited company. Josiah Sau Lo and Adriel Forrock are the directors of a financial services company in Singapore. The name of the company is Foreign Transaction Exchange (Singapore) Ltd (FTX). It is listed on the on the SGX. The other three directors are: Gary Wang, Samuel Freeman and Charlotte Allison who are all domiciled in the Bahamas. Josiah, Adriel and their respective families as well as the company are clients of KT. The company's financial activities span direct equities, managed funds, derivatives as well as crypto currencies. They have offices and companies in Australia, South East Asia, the Americas, Europe and the Middle East. Head office for taxation purposes is based in Delaware in the United States of America. The actual trading activities are controlled out of the Bahamas. The key directors are Gary Wang, Samuel Freeman and Charlotte Allison who are all domiciled in the Bahamas.
Because of the nature of the activity and the complexity involved, staff are sent to different offices around the world and various meetings of the company are held in different locations. Given the uncertainty in the global economy and the threat of global recession the companies in the group have had to undertake various steps to increase revenue as well as reduce costs. Josiah and Adriel of FTX have requested a meeting with the managing director of KT to discuss various taxation issues.
The managing director is away in Western Sumatra on business for another client of KT and cannot attend the meeting. He will not be back until Monday 21 August 2023. Therefore, he has requested the senior manager (Serena) to organize the meeting with the clients. She has asked you:
1. To sit in on the meeting and
2. Take notes on the issues raised and then to
3. A written report on the matters for review by Serena. The meeting is scheduled for Thursday 17 August 2023 at 9 am.
Issue: Deductions
Given the state of the economy, FTX found it hard to generate sufficient cash flow. The directors Josiah and Adriel looked closely at the company's operating expenses. They wanted advice about the following expenses incurred by the company.
1. A customer owed the company $65,000 by way of management fees. This was due on 30 November 2022. As at today 17 August 2023, it has not been paid.
2. To encourage new business for not for profit organisations the company donated the following:
a. Gave $84,451 to an approved institute of public character (IPC)
b. Gave $12,000 of food to another IPC to help feed the homeless
c. Gave $5,000 of bedding to another IPC to help the homeless have something to sleep on.
Issues they seek advice on:
1. Can the company claim the $65,000 as a bad debt.
2. Do the amounts given to the IPC qualify as approved donations?
(Identifying the issues raised from your understanding of the facts, apply the relevant law (legislation, case law and if relevant IRAS guidelines) to the issues and come to a conclusion. Must be supported by case law or legislation. Your conclusion in respect of each query raised by the client.)