Any relevant income tax and/or capital gains tax implications, regarding the sale of property arising from the facts down below. In your answer make sure you show your calculation of any relevant amount included in LandCos assessable income in relation to the sale of property. Include relevant legislative provisions, tax rulings, and relevant cases. (5 marks)

A couple of years ago, on 1 August 2019, Simpson Enterprises Pty Ltd, acquired all of the shares in another company LandCo Pty Ltd. (Eight years earlier LandCo Pty Ltd had acquired two acres of land in the Central Coast. The purchase price of the land was $1 million. At the time of the purchase of the land, the minutes of the directors meetings recorded that the purpose of the purchase was to build singlestorey beach villas for holiday rental to tenants. However, the work never actually began on the construction of beach villas.) Simpson Enterprises Pty Ltd, in determining a purchase price for the shares in LandCo Pty Ltd, valued the Central Coast land at $1 million. LandCo Pty Ltds previous business activities have not involved residential construction projects.

Following the purchase of the shares in LandCo Pty Ltd, new directors were appointed to LandCo Pty Ltd. The new directors passed a resolution to seek a rezoning of the Central Coast land, aiming to construct 8 homes on the land and to sell each home at a profit. LandCo Pty Ltd submitted a rezoning application to the council which involved the payment of council fees of $5000 and also legal fees of $4000 in relation to obtaining legal assistance in the preparation of the rezoning application. The rezoning application by LandCo Pty Ltd was successful.

Following the rezoning LandCo Pty Ltd obtained an estimate of the market value of the Central Coast land. The valuation of the land was $3 million. In January 2020 LandCo Pty Ltd commenced work on the building of the homes. On 1 March 2021 the building of the homes was completed at a total cost of $2 million. There was significant market demand for the homes and LandCo Pty Ltd sold each home for $2 million.