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Question: simon and his wife barbra own a sixacre piece of...

Question details

Simon and his wife Barbra own a six-acre piece of land on the Bundaberg and

Fraser Coast in Queensland. They purchased the land in April 2001 for $500,000,

intending to build a home there when they retire.

As a result of growing differences, Simon and Barbra decided to divorce in 2017.

They will have to sell the property so each can have their own share of the

proceeds. Ben, a real estate agent, advised Simon and Barbra that the property

would yield a much higher selling price if they subdivided the property into

smaller lots and sold them in individual blocks. Following Ben’s advice, Simon

engaged a solicitor to get Council permission to subdivide the land. Council

approved the subdivision subject to:

 subdivide the land into lots measuring no less than 500 square meters;

 make available at least 15% of the available land for parks and recreational

areas;

 install water, electricity and sewerage at Simon and Barbra’s cost;

 provide sealed roads to each of the subdivided lots at Simon and Barbra’s

cost;

 install a bus stop and bus shelter on the property at Simon and Barbra’s

cost.

Simon and Barbra proceeded with the subdivision and sale of the individual lots.

They undertook an extensive publicity campaign to raise awareness of the new

properties. By 30 June 2019, Simon and Barbra had sold 80% of the properties for

a total consideration of $5.5 million. Citing relevant legislation and case law,

advise Simon and Barbra whether any part of the sale proceeds would constitute

ordinary income for the year 2018-19.

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