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QUESTION 1- (15 MARKS) 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 Casinos building for a long period of time (90 years). John was instructed by the relevant Government agency to pay $180 million for the approved casinos licence and $80 million as prepaid rent covering the first 10 years of casinos 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.

Assignment Structure should be as the follows: Weighting 2% 2 % 2 % QUESTION 1: DIFFERENCE BETWEEN CAPITAL AND REVENUE EXPENDITURE Identification of material facts (issues) regarding John's prepaid rent. 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). Thorough yet succinct application of tax law (e.g. ITAA 1936 and ITAA 1997) to material facts in John's case. Detailed and accurate identification of the lump sum rental payment are reached. Correct information and taxation law have been used and properly cited. A detailed analysis has been performed. Ability to show excellent understanding of the cases and/or section of legislation, its context and application of taxation law. 3 % 3% 3 % Assignment Structure should be as the follows: Weighting 2% 2 % 2 % QUESTION 1: DIFFERENCE BETWEEN CAPITAL AND REVENUE EXPENDITURE Identification of material facts (issues) regarding John's prepaid rent. 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). Thorough yet succinct application of tax law (e.g. ITAA 1936 and ITAA 1997) to material facts in John's case. Detailed and accurate identification of the lump sum rental payment are reached. Correct information and taxation law have been used and properly cited. A detailed analysis has been performed. Ability to show excellent understanding of the cases and/or section of legislation, its context and application of taxation law. 3 % 3% 3 %