LAW 6001 Taxation Law Assessment Brief 3 Case Study

Question 3 (15 marks)

Indianna is a resident individual taxpayer. She owns 22 hectares of land which has always been used for producing assessable income. She decides there is no longer the return required from owning the land and so she has decided to develop the land into residential housing. She has thought about the three following scenarios:
a) Indianna undertakes all the activities necessary and sub-divides the property into 80 lots in addition to her 2 hectare area personal use area where the family home is situated. She then sells all 80 undeveloped blocks to a property developer.
b) Indianna undertakes the same activities as above and holds an auction day to auction off all 80 blocks as separate packages to the highest bidders
c) Indianna does not subdivide the land and sells the land as an entirety to a development company, and pays a fee to the development company of 65% of the total sale proceeds for carrying out the entire development on her behalf. All of the balance is to be paid to Indianna on the sale of the last block.

Required:

Part 1
As Indianna’s tax advisor explain the potential assessable income issues involved for each scenario if:
a) The property has been owned by Indianna since 1 November 1976
b) The property has been owned by Indianna since 1 November 1986
Part 2
The land development project is likely to take place over at least two financial years. Discuss when Indianna will derive any assessable income she receives from each of the three scenarios.