Question 3 Axis Holdings Ltd was founded eight years ago by Lucas and Tait , who were the initial shareholders and directors . Lucas and Tait had for many years been involved in property development . Seven years ago , Axis purchased two properties in an area where there was extensive real estate development . For six years the properties were used for cattle breeding and the properties were improved for that purpose Owing to unforeseen circumstances , the cattle breeding proved to be unprofitable and there was an imminent zoning change whereby the properties could only be disposed of in 100 -hectare lots instead of 25 -hectare lots . Axis therefore arranged to subdivide the land up into 25-hectare blocks and sold the whole property to one purchaser . The Commissioner assessed Axis on the gross receipts in s 6-5 of ITAA 1997 Discuss Question 4 Peter is a farmer with 15 hectares of land on which he has grown oranges since 1970 . He inherited the land from his father in that year . The farm has gradually been surrounded by urban development and , three years ago , following complaints from the neighbours about pesticides , he decided to sell the land Two years ago , Peter contracted with a consulting engineer and surveyor who prepared a subdivision plan and who applied to the local council for rezoning . Peter was not directly involved in the plan or the rezoning , which was granted by the council later that year . Nearly all expenses were paid by Peter , although he had to borrow $120,000 to cover some incidental expenses Following completion of the development the land went on sale through a real estate firm and to date 150 of the 200 blocks have now been sold for residential housing . Blocks sell for an average of $ 150,000 each Advise Peter as to his tax liability , if any . Question 5 Five years ago , Bruce purchases 10 hectares of land for $1 million in an area that was ripe for subdivision . At the time of purchase he intended to get planning permission from the local council to develop the land by subdivision and then resell it at a profit , but instead he leased it for grazing horses . Three years ago , Bruce attempted to get