Briefly explain the Australian tax law implications of each of the following scenarios, by citing relevant tax legislation and case law where appropriate.

1. James received a lump sum payment from the Daily Newspaper in full settlement of an action for defamation. Is this amount assessable income and provide the explanation?

2. AAB Ltd is a marine and boat manufacturer and has incurred costs of $200,000 on feasibility studies for a new marine engine. Will this expense deductible under s8-1 ITAA97? If not, can it be deductible under specific section and the timeframe for the deduction?