John has applied and been approved a licence to operate a casino in Melbourne, which later on he named it The Casino East. John has received 10-year licence from Victorian Government to operate the casino. He also received approval for Casino's building for a long period of time (90 years). John was instructed by the relevant Government agency to pay $180 million for the approved casino's licence and $80 million as prepaid rent covering the first 10 years of casino's rental. John has negotiated to pay $400,000 rental per year for the remaining 80 years of the lease.

With reference to relevant legislation and case law discuss whether casinos prepaid rent is considered a revenue expense or a capital expense.

Weighted:

Identification of material facts (issues) regarding John's prepaid rent. 2 %

Identification and analysis of legal issues / legal question and relevant taxation law in regards to casino's rental (e.g. ITAA 1936 and ITAA 1997). 2 %

Thorough yet succinct application of tax law (e.g. ITAA 1936 and ITAA 1997) to material facts in John's case. 2 %

Detailed and accurate identification of the lump sum rental payment are reached. 3 % Correct information and taxation law have been used and properly cited. A detailed analysis has been performed. 3 %

Ability to show excellent understanding of the cases and/or section of legislation, its context and application of taxation law. 3 %