Danny, a self-employed electrician, purchased a house in Melbourne as an investment for $560,000 on 1 October 2020. He rented out the house from that date to the existing tenant for $500 per week. Danny took out a bank loan of $400,000 on 1 October 2020 to purchase the house, and the loan terms was for 25 years and a variable rate of interest. Interest paid on the loan for the tax year ended 30 June 2021 was $35,000. The legal fees, loan charges, and stamp duty paid in relation to the loan were $6,800. Danny has asked for your advice as to whether he can claim a tax deduction for the borrowing costs of $6,800. Which of the following is most correct in respect to Danny's ability to claim a deduction for the borrowing costs? 1) Borrowing costs are capital and, therefore, never deductible. 2) The borrowing costs are immediately deductible. 3) The borrowing costs are capital, but they are deductible over 5 years. 4) The borrowing costs are capital, but they are deductible over 25 years