Rosemary buys a vacant block of land for $50,000 on 20 October 1997. On 20 May 1999 she builds a house (assume that this is the date of either contracting for or commencing construction) on the land at a cost of $100,000 and occupies it as her main residence.
As a member of a firm of tax advisors you are required to advise her of:
1. the capital gains tax implications of her selling the property on 1 June of the current year for $300,000;
2. what difference would it make if the land had been purchased on 20 October 1984; and
3. what difference would it make if, in the original situation, the house had been built on:
a. 20 May 2003; and
b. 20 May 2017.
Your advice should be supported by reference to the applicable section(s) within the income taxation act(s) and any cases that may apply.
In the context of the preceding question, advise whether the Commissioner of Taxation has expressed an opinion about the way in which the income tax legislation applies to dwellings that are built on land acquired before the advent of capital gains tax. If such an opinion has been expressed, prepare a report that explains the Commissioner’s
position which could assist other members of your firm in the future when providing similar advice to their clients.