MLC301 Principles of Income Tax Law - Assessment Questions

QUESTION 2. 4

Consider the following situations and discuss whether any part of the receipt/s is capital in nature.
(a) An author sells the rights (copyright) to the publication of his book for a fixed lump sum.
(b) A property developer operates his business by purchasing land that can be subdivided into housing lots. In some cases he simply sells the vacant blocks of land after subdivision, but in other cases he contracts the construction of a home and sells the property with the completed house. In the current year he sold:
• subdivided lots for $400 000
• completed home and land packages for $800 000
• for $150 000 land on which his business office was located as the office was now too small
• $300 000 worth of farm land which he inherited from his parents and has been leased to a farmer for the past 10 years. This land was not suitable for subdivision so he sold it to the farmer who had been leasing it.