Question 39 Read the following extract from FC of T v. The Myer Emporium Lid (1987) 87 ATC 4363, 163 CLR 199 and then answer the question below. The taxpayer carried on the business of retail trading and property development and also acted as a finance company for other companies in its group. In order to obtain funding to diversify its operations the taxpayer entered into the following prearranged series of transactions: (a) On 6 March 1961, the taxpayer lent $80 million to Myer Finance Ltd (Myer Finance) a shelf company of the taxpayer, acquired on 20 February 1981. The loan agreement between the taxpayer and Myer Finance provided that Myer Finance was required to repay the loan 'on but not prior to 30 June 1968 and that interest at the commercial rate of 12.5% per annum was to be payable on the loaned funds on dates set out in the loan agreement. The total interest to be payable amounted to $72 million. An initial payment of interest only, in the sum of $82,182, was paid on the date the loan was made. (b) On 9 March 1981, the taxpayer assigned to Citicorp Canberra Pty Ltd (Citicorp) (which had accumulated tax losses) 'the moneys due or to become due as the interest payments and interest thereon' in consideration of Citicorp paying the taxpayer a lump sum of $45.37 million on the day. The above transactions were interrelated in that the taxpayer would not have made the loan to Myer Finance unless Citicorp had agreed in advance to pay for the assigned interest Which of the following statements most accurately describes the $45.37 million lump sum payment? (a) The transaction was an isolated transaction outside the ordinary course of business, and therefore a capital asset was extinguished with the payment of $45.37 million. (b) The two transactions, namely the loan agreement and the assignment, were essential and integral elements of an overall scheme, that being a profit-making scheme. (c) The two transactions arose outside the ordinary course of business, and therefore were capital by nature. (d) There had been no profit arising from the transaction as the $45.37 million received was merely an amount equal to the value of the chose in action which it had assigned, namely the right to receive future interest from the debt