LAW6001 Taxation Law Case Study

Question 3 (15 marks)

In 1975, Joe Messina purchased five hectares of land 40 km from Sydney’s CBD. The land was used for agricultural pursuits, with produce sold through Sydney markets. In the year 2000 the government proposed construction of an airport adjacent to Joe’s land. Subsequently, in 2005 Joe sold the land for $700,000 and used this entire amount to acquire a large block of land closer to Sydney with the intention of keeping the land as a retirement nest-egg. In 2016, Joe was approached by a real estate developer to construct eight townhouses on the land. Joe accepted the proposal and employed architects, builders and obtained development approval from the local council. Joe oversaw the development and engaged real estate agents to market the townhouses for sale upon completion. During the course of the 2018/19 income year seven townhouses were sold for $650,000 each. Joe retired to the remaining townhouse.

Required:

Advise Joe Messina about whether the proceeds from his land and building transactions constitute assessable income and the basis on which they may be assessed. You must include relevant section numbers and cases in your explanation.