Kenneth is a medical practitioner specialising in stress management, and has a number of university business students as clients. After a practically busy session in early January this year, Kenneth fell victim to his own speciality, in that, he was unable to work due to stress.

Kenneth being a practical man had a Professional Income Replacement Insurance Policy with Not-a-Penny-More Insurance Co, which provided for monthly benefits of $4,000 during a period of disability. Kenneth paid yearly premiums of $200 for this insurance policy.

During the time Kenneth was unable to work, he made a claim under the insurance policy. To add to his stress, Not-a-Penny-More Insurance Co denied any liability for Kenneth s claim.

Kenneth commenced legal proceedings against the insurance company, as he was sure that he was entitled to a claim under the policy. After a protracted eleven months, the insurance company finally agreed that Kenneth was entitled to claim, and paid Kenneth a settlement lump sum payment of $44,000 in December this year representing eleven months worth of payments.

In relation to the above facts which one of the following statements is true?

	Kenneth would not be entitled to a tax deduction for the yearly insurance premiums payable of $200, as he would not derive assessable income by this outgoing.
	The fact the payment of the monthly benefits was made in one lump sum would not change the revenue character of the receipt if it were designed to replace his lost income while disable.
	Kenneth would be assessable on part of the $44,000 for the prior income year that represented payments for January to June.
	Kenneth will not be assessable on the lump sum settlement as it is a payment of capital, paid in consideration for the cancellation of Kenneth s right to sue.
	Kenneth would not be entitled to a tax deduction for the yearly insurance premiums payable of $200 in years that he did not make a claim under the insurance policy.