MLC301 Principles Of Income Tax Law - Assessment Questions

QUESTION 3. 9

Alicia signed a contract to buy a property on 1 September 1985 for $50 000 and she moved in immediately to make it her home. Stamp duty and legal fees were $1000 and were paid on 1 September 1985. Settlement was on 1 October 1985. Tragically, Alicia died on 1 October 2010. The market value of the house at this time was $380 000. Her daughter Betty inherited the house. Betty decided to rent out the property rather than live in it.
Betty entered into a contract to build an extension for the house on 1 January 2012. This cost $150 000. Construction finished on 1 June 2012. Betty signed a contract to sell the property on 1 November of the current tax year for $600 000. Settlement was on 1 December.
i. Discuss the CGT consequences of these facts.
ii. If Betty had sold the house before 1 October 2012, what difference would
it have made?