Required: Discuss whether the sale of the land generates ordinary income for Karl due to laws relating to the assessability of extraordinary/isolated transactions. Do not discuss Capital Gains Tax. Where appropriate, support your answer with legislative and case authority.    
Karl is a rich employee investment banker. His friend Petra ran a DVD store. Petra owned the DVD store premises and land that it was located on. Petra needed some money as her store was struggling financially, so Karl lent her business $100,000 at 8% annual interest. However, after a year it became apparent that her business could not repay this. Consequently, they came to an agreement, where in exchange for Karl forgiving the debt, he would take a one quarter interest on the land that the business premises was located on. At the time of this arrangement it was agreed that the land would be sold in the near future. Consequently, the store was demolished, and council plans were obtained to build a 5 storey apartment in its place. Karl was the one who organised the demolition and worked closely with the architects and lawyers to get the council approval. This involved about $20,000 in fees for architects and lawyers. Subsequently, the land with plans and council approval was sold through a real estate agent for $800,000

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