Leo holds patents for a new product called Bi$-$tron, which improves the performance of motor

vehicle engines. Leo enters into an exclusive licensing agreement with a Russia Pty Ltd for the

manufacture and sale of Bi$-$tron. The licensing agreement provides for a payment of $$5$ for

each bottle of Bi$-$tron sold and for the payment by the licensee to Leo of a lump sum of

$$10000$ described as a non$-$refundable advance of royalties. At the year$-$end Russia Pty Ltd

sells no bottles of Bi$-$tron, and the $$10000$ is the only amount received by Leo.

Advise Leo of any income tax implications. Would it make any difference to your answer if in

the current year, the licensee had in fact sold $4000$ bottles of Bi$-$tron under the licensing

agreement.