You work as a tax accountant for a local firm of Chartered Accountants. One of your clients is Eric Macqueen (Eric). Eric acquired land in 1990 for the purpose of establishing and carrying on the business of producing milk. Subsequent to buying the land Eric Macqueen bought 1,000 cows. The purchase price of the land was $750,000.
The farming business proved to be successful and for the next 26 years Eric's farming operations generated satisfactory profits from the sale of milk to local milk processers. However, with the introduction of $1 per lire milk by the major supermarkets in Australia Eric found it difficult generate sufficient profits. In July 2016 Eric decided to cease his farming operations and sell all the cows to the local abattoir. Additionally, Eric decided to sell his farming land and close his farming operations completely.
In November 2016, Eric approached a local real estate agent to advertise for the sale of the land. As the farm was located very close to a town which was in need of land for developing houses for young couples the local estate agent advised Eric that the land could be sold for substantially more if Eric were to subdivide the land and sell the land in separate lots. This would generate bigger sale proceeds of approximately $3,000,000 compared to selling the land in one block which would realise approximately $2,500,000. The estate agent offered to advertise and sell the subdivided land for a commission of 2.5% of the total proceeds.
Based on the advice received from the estate agent, in January 2017 Eric is considering two options of selling the land: 1. Making an application to the local council to subdivide the land into 50 separate lots. The approval for the subdivision would take approximately three months. Each lot will then be advertised for $60,000. The sale of the 50 lots would take approximately six months following the approval by the local council. 2. Sell the entire farming land in one transaction for $2,500,000.
Eric has requested you to advise him whether he would be required to include any amount in his assessable income as a result of the sale IF:
1. The land is subdivided and sold in separate 50 lots for a total of $3,000,000 OR 2. The land is sold in one transaction for $2,500,000 without subdivision into 50 lots.
You are required to provide your advice by referring to: 1. Legislation 2. Relevant case / cases and the facts of each case 3. The case's / cases’ relevance to the facts provided above 4. The judgment made in each case / cases. Case 2
You work as a tax accountant for a local firm of Chartered Accountants. One of your clients is George Eals (George). George is a permanent resident of Australia. George was born in the United States and retains his United States citizenship. George is employed by an international information technology firm based in Sydney, Australia and is required by his employer to travel overseas on consulting assignments at least four times each year. In the 2016 taxation year George was on overseas consulting assignments for 150 days.
George is married with three children and together with his wife and children he lives in a house in Coogee, Sydney. George and his wife own the house jointly. Additionally George owns shares in Google Inc., an American multinational technology company whose shares are listed on the New York Nasdaq. George and his wife have a joint bank account at Bendigo Bank, Coogee branch, and his monthly salary is paid into this account.
George has been approached by his employer to undertake a long consulting assignment overseas which will require him to live overseas for a period of three years. He will be entitled to return to Australia every four months for a one month holiday each time.
At the end of the three year assignment George may return to live and work in Sydney, Australia.
George has asked you to advise him whether he will be a resident of Australia for income tax purposes and how his salary and investment income from Google Inc. would be taxed IF:
1. His wife and children remain in Australia living in the house in Coogee, Sydney OR 2. The house is sold in Coogee, Sydney, and the whole family moves with George overseas.