The AAT has held that two taxpayers were allowed a deduction for part of their share of a partnership loss incurred in the production of "Jolson - the Musical". The amount of the deductible loss was calculated by reference to the cash contribution made by the two taxpayers ($50,000 each). The AAT held that the amount was deductible under s 8-1 ITAA 1997 and was not denied deduction by Part IVA of ITAA 1936. In contrast, no deduction was allowed for that part of the partnership loss referable to a round robin loan arrangement. Penalty tax on the shortfall was reduced from 50% to 25%: De Simone and FCT  AATA 708 (AAT, Pascoe SM, 13 August 2008).
For a copy of the decision, go here