A couple of years ago, on 15 September 2019, Jones Enterprises Pty Ltd, acquired all of the

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A couple of years ago, on 15 September 2019, Jones Enterprises Pty Ltd, acquired all of the shares in another company CorpCo Pty Ltd. (Eight years earlier CorpCo
Pty Ltd had acquired two acres of land in the South Coast. The purchase price of theland was $1 million. At the time of the purchase of the land, the minutes of the
directors meetings recorded that the purpose of the purchase was to build single-storey beach villas for holiday rental to tenants. However, the work never actually
began on the construction of beach villas.) Jones Enterprises Pty Ltd, in determining a purchase price for the shares in CorpCo Pty Ltd, valued the South Coast land at $1
million. CorpCo Pty Ltd’s previous business activities have not involved residential construction projects.

Following the purchase of the shares in CorpCo Pty Ltd, new directors were appointed to CorpCo Pty Ltd. The new directors passed a resolution to seek a rezoning of the South Coast land, aiming to construct 8 homes on the land and to sell each home at a profit. CorpCo Pty Ltd submitted a rezoning application to the council which involved the payment of council fees of $5000 and also legal fees of $4000 in relation to obtaining legal assistance in the preparation of the rezoningapplication. The rezoning application by CorpCo Pty Ltd was successful.

Following the rezoning Copco Pty Ltd obtained an estimate of the market value of the South Coast land. The valuation of the land was $3 million. In January 2020 Copco Pty Ltd commenced work on the building of the homes. On 1 March 2021 the building of the homes was completed at a total cost of $2 million. There was
significant market demand for the homes and Copco Pty Ltd sold each home for $2 million.

Prepare SWC’s Memorandum of Advice. Advise Jones Enterprises Pty Ltd, Henry Jones and Marcus regarding the following in relation to the 2021/22 income year:

B) any relevant income tax and/or capital gains tax implications, regarding the sale of property arising from the facts in PART B. In your answer make sure you show your calculation of any relevant amount included in Copco's assessable income in relation to the sale of property.