1. John is a traveller and love to read books. he had a wish to write a book about his travelling life experiences. He is your client and has just written his first book of his experience as a traveller. He spent the last two years writing the book and he has received two offers from a publishing company that wished to publish his book.

The first offer is to purchase the copyright for a lump-sum payment of $50,000 provided your client gives up future claims to the copyright and royalties.

The second offer is to pay 10% of the sale price of each book sold provided your client agrees to assign the copyright in the book to the publisher for 10 years.

Discuss the effect on assessable income of each of the two offers. (8 marks)

2. Receipts from business activity involves two steps process of characterising receipts as ordinary income, discuss any one step.