Reference no: EM13537922

Janet (taxpayer) residing in Australia is named as the sole beneficiary of aproperty (1.85 hectares) with a large homestead as a result of the deathof a relative on 7/10/2010. The property is not used for commercialpurposes and at the date of death, the property was valued at$1.45million.

Settlement took place on 21/12/2010. After moving into thehomestead shortly after taking ownership, she planned to take a one-yeartrip which she had been planning for some time in late 2011. The taxpayerfelt that the homestead was far too large for her (she is single), applied tothe ATO for an exemption for ABN registration and some fourteen monthslater (16/2/2012), she obtained council approval to subdivide the propertyinto three, with the intention of building three units, one she will take up asher own residence, the other two will be sold.

Work commenced someweeks after approval and on 12th December that same year, thetaxpayer returned and moved into one of the apartments. The other twowere sold in March/April in 2013, one selling for $1.35m (24/3/2013), theother for $1.45m (9/4/2013).

You are to consider the CGT implications both from the relevant sections(ITAA), rulings, etc. and from the values (if/where applicable).

Assume thatthe blocks are subdivided equally. For each determination that you make,you should clarify. You should also clarify what Capital Gains and CGT is inyour answer

2: Explain using examples and relevant sections of the act, what thedifferences between Ordinary Income and Statutory income are.