The AAT has held that a taxpayer who wrote off as a bad debt distributions owed to him by a trust (and which had been returned by him as assessable income) was not entitled to a deduction under s 25-35(1) of ITAA 1997.
The Commissioner argued that the amount written off was not the taxpayer’s unpaid present entitlement; rather, it was the outstanding balance in the loan account in the taxpayer’s name in the books of account of the trust. The AAT agreed.
The AAT said, at para 20:
"What, relevantly, was included in Mr Pope’s assessable income in those years had as its source the share of the trust income to which he became presently entitled. What was written off was of an entirely different character; it was an investment Mr Pope chose to make in the business of the Trust.
Pope and FCT  AATA 532 (AAT, Hack SC DP, 4 August 2014).