MLC301 Principles Of Income Tax Law - Question/Answer Assessment Help

Question 5 (4 points)

Briefly explain whether the following receipt of $1,500,000 is ordinary income for the taxpayer (4 marks):
The taxpayer bought a small farm in regional Victoria. At the time of purchasing the land he wanted to cease farming activities and build a school camp on the land. After some investigations the taxpayer realized he could make more money by selling the land in a few separate blocks.
The taxpayer also arranged a builder to build a small house on each of the parcels of land, as they were more likely to sell if they had a house on them. The necessary utilities were connected for each of the blocks. The taxpayer then decided to save money on the sale, and he arranged all of the marketing himself.
The development expenses were $500,000. He successfully sold all three blocks for a total of $1,500,000.