BUISENESS MANAGEMENT
TAXES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Loss of cash by theft or embezzlement by an employee.
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Irrecoverable employee loans by a company.
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Ms Minnie, a casher embezzled cash collections of RM12, 000. When Ms Daisy, a new director discovered this, the sum was claim as loss by embezzlement in the statement of profit or loss.
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Mr Pluto, suffered a loss of RM5, 000 in his coffee shop business when his brother, who was an employee, stole the money. Mr Pluto claimed the loss but no action was taken against the brother for the recovery of the loss.
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Detailed explanation-1: -Loss on account of embezzlement by an employee is allowed as a deduction in the year in which such embezzlement is discovered. Loss of stock-in-trade by fire or other natural calamities or due to the negligence of employees is deductible.
Detailed explanation-2: -Allowable itemized deductions include mortgage interest, charitable gifts, unreimbursed medical expenses, and state and local taxes.
Detailed explanation-3: -Embezzlement refers to a secret withdrawal of money by a person entrusted with management and utilization of funds for business operations. An embezzler takes advantage of the employers’ trust and intentionally misuses company funds and assets for personal gain.
Detailed explanation-4: -Theft losses are generally deductible in the year you discover the property was stolen unless you have a reasonable prospect of recovery through a claim for reimbursement.