Q. Outside of the accounting firm, Britney spends most of her time attending music concerts. In fact, from early childhood she has studied various musical instruments and played in bands and she knows the Perth music scene very well. One night she discovers a new band (Tame Antelope) that she thinks has the potential to become a world-leading band. The band needs money and help with connections to succeed, so Britney invests her life savings of $10,000 in buying the copyright to the band's 5 songs (assume this is an outgoing of capital), arranges with her lawyer friend to draft up the contract and convinces her band manager friend to introduce the band to music companies. Britney's aim is to achieve a record deal for the band and for Britney to on- sell the copyright to the music company. On 1 May 2022, the band signs with Sony Music. However, instead of buying the copyright from Britney, Sony Music pays Britney $50,000 for a 5-year licence to use the copyright for the songs, with additional monthly payments of $1,000 under the licence.

Is the $10,000 considered a deduction? Why, why not?

Is the $50,000 payment income and/or taxable to Britney? If so, what type of income?

Are the $1,000 monthly payments taxable and income? If so, what type of income? Explain using ITAA.