• On 1 August 2014, The Lucky Restaurant Unit Trust paid an amount of $6,450 to acquire a liquor licence. The licence is valid for two years.
• At 30 June 2015, Lorenzo discovers that the current cost of a liquor licence (as advertised on the Queensland Office of Liquor and Gaming Regulations website) was $8,120.
Required:
(i) Lorenzo wants to revalue the liquor licence in the external financial statements of the unit trust from its cost of $6,450 to its current market value of $8,120.
Lorenzo seeks your advice as to whether the liquor licence can be revalued to its current market value of $8,120. Secondly, he wants to know whether the licence needs to be depreciated/amortised or can it be shown in the accounts unamortised?
(ii) Lorenzo is keen to find out the income tax treatment of the liquor licence and how much (if any) is tax-deductible? Please explain how you went about finding the answer to this question?
Make sure that you quote sections of the ITAA (1936) and/or ITAA (1997), taxation cases, taxation rulings and taxation determinations where relevant in your answer.