Taxpayer 1 and Taxpayer 2 are qualified surveyors running separate businesses in a small town. They provide services to the public, but they have both found that, in the past couple of years, the town is not big enough to support two full-time surveyors.

Taxpayer 1 offered Taxpayer 2 a lump sum of $150,000 plus $10,000 for each of the next three years on condition that Taxpayer 2 ceases his business and leave town for at least three years.

Taxpayer 2 agreed to Taxpayer 1's offer and Taxpayer 1 paid the relevant amounts.

Based on these facts, which of the following statements would be most correct in relation to Taxpayer 1's ability to claim tax deductions for the payments to Taxpayer 2 under s 8-1?

Select one:

a. The payments were necessarily incurred in the course of carrying on Taxpayer 1's business and should be deductible.

b. The payments were incurred to expand Taxpayer 1.s business and earn more assessable income and should be tax deductible.

c. The payments seek to establish or expand Taxpayer 1's business entity and are therefore capital in nature and not deductible.

d. The payments secure a temporary advantage no different from the paying of an annual premium for insurance on a motor vehicle.