Steve purchased a newsagency business on 1 July nine years agofor $180 000 by taking out an interest only loan for $180 000 withthe Queensland Bank at 9% interest for a term of ten years. Stevepaid loan establishment fees and stamp duty in setting up the loanof $1500. Unfortunately, the business consistently ran at a lossand on 1 July of the current tax year, Steve sold the business for$120 000 and used the proceeds to reduce the loan balance to $60000. Referring to the above facts about Steve, which one of thefollowing statements about his taxation situation is mostcorrect?

Select one: 1. Interest on the business loan is deductible whilethe business is operating, but stops being deductible from 1 Julyof the current tax year when the business is sold. 2. Pursuant tothe decision in Steele v FCT 99 ATC 4242, none of the interestexpense incurred on the business loan is deductible to Steve as itrelates to the purchase of a capital asset. 3. Pursuant to thedecision in FCT v Brown 99 ATC 4600, Steve will continue to beentitled to a deduction for the interest expense on the remainingloan after the sale of the business as the nexus between thecarrying on of the business and incurring the interest has not beenbroken. 4. Steve was entitled to claim an immediate deduction of$1500 for the establishment fees and stamp duty on the businessloan in the tax year when the loan was taken out. 5. Steve will beentitled to a deduction of $150 in the current tax year in relationto the loan establishment fees and stamp duty pursuant to section25-25.