Sue is a selffunded retiree who manages her own investment portfolio consisting of shares in various companies listed on the Australian Stock Exchange and rental property investments. Before retiring, Sue had owned and operated a successful fashion retail business which was being run from premises in Paddington and the Central Business District. Until she lived in a large house in Woollahra, Sydney, with her husband who died in April Wishing to downsize, Sue entered into a contract in May to purchase for $ million an offtheplan subpenthouse bedroom apartment in the Hyde Park property development Hyde Park Development a multimillion dollar project to transform an existing office block into a luxury apartment tower overlooking Sydneys Hyde Park.

The Hyde Park Development was to occur in three stages, with the subpenthouse slated to be completed as part of stage in July In December the developer advised Sue that due to unanticipated construction overruns the completion date for the subpenthouse was extended for months to July Earlier however, Sue had agreed to sell the Woollahra house for $ million.

The contract for sale of the Woollahra house was exchanged in November with a long settlement period extended to July to coincide with the original settlement date for the subpenthouse apartment. In the meantime, in March Sue agreed to purchase for $ million a bedroom unit in a lower floor of the Hyde Park Development that was completed the previous month as part of Stage Sue was impressed by the quality and workmanship of the Hyde Park Development and its prime location. She also considered the price for the bedroom apartment highly reasonable.

Sue moved into the bedroom apartment in April whilst awaiting completion of the subpenthouse. After receiving confirmation in early March from the developer that the subpenthouse will definitely be completed in July Sue listed the bedroom apartment for sale with highly reputable real estate agents. The original asking price was $ million. Due to Covid pandemic lockdowns however, it was difficult to find buyers for the property, which eventually sold for $ million. The exchange of contract for sale of the bedroom apartment occurred on May with settlement completed on July

Sue claimed a deduction of $ in relation to the loss on the sale of the bedroom apartment in her income tax return for the year ended June However, the Commissioner of Taxation disallowed the deduction on the basis that the sale of the bedroom apartment was a mere realisation of a capital asset and that the $ loss was therefore capital in nature. In addition, the Commissioner said that because of s of the Income Tax Assessment Act ITAA Sue could ignore any capital gain or loss she made from the sale of the bedroom apartment. As a result, the Commissioner said Sue was not entitled to carryforward the capital loss she made on the sale of the bedroom apartment.

According to the Commissioner, the $ loss was:

i of a private or domestic nature within the terms of the negative limb within the meaning of s b of ITAA and

ii not incurred in the income year.

Sue now seeks your advice. She wishes you to draft an objection letter to the Commissioner. To this end, Sue contends that she purchased the bedroom apartment not solely to move into it while construction of the subpenthouse was being completed. Rather, she bought it with the expectation of making a profit on its eventual sale and that she moved into it rather than lease it out as tenants were unlikely to look after it as well.

Required: Advise Sue whether she is entitled to claim a deduction under s of ITAA for the $ loss incurred from the sale of the bedroom apartment. Your advice must be supported by reference to legislation, case law and tax rulings.