ABC Pty Ltd. purchased 5 acres of land, which had been used as land for grazing...

  

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ABC Pty Ltd. purchased 5 acres of land, which had been used as land for grazing sheep, for $2 million. The company was formed for the purpose of purchasing the land and grazing sheep on it and Mr and Mrs Jones owned all the shares in the company and were the directors of the company. Five years after the purchase, Mr and Mrs Jones are considering either selling the land or selling the shares in the company. The property was vacant for the entire time that Mr and Mrs Jones owned it (they did not live on the property). It was never used as grazing property. Mr and Mrs Jones have no knowledge or experience regarding how to graze sheep but had purchased and resold land on several occasions. Required: 1. Citing all relevant legislation and case law, advise Mr and Mrs Jones as to the income tax consequences of the below potential transactions: (a) The sale of the land by ABC Pty. Ltd.; and (b) The sale of the shares in the company by Mrs and Mrs Jones. In your answer you should particularly discuss whether the sale of the land and the sale of the shares would be regarded as assessable income and any potential capital gains tax consequences arising from the scenario. Please mention if there is any additional information you would need from Mr and Mrs Jones to provide a more precise answer, and how this information would influence your advice. ABC Pty Ltd. purchased 5 acres of land, which had been used as land for grazing sheep, for $2 million. The company was formed for the purpose of purchasing the land and grazing sheep on it and Mr and Mrs Jones owned all the shares in the company and were the directors of the company. Five years after the purchase, Mr and Mrs Jones are considering either selling the land or selling the shares in the company. The property was vacant for the entire time that Mr and Mrs Jones owned it (they did not live on the property). It was never used as grazing property. Mr and Mrs Jones have no knowledge or experience regarding how to graze sheep but had purchased and resold land on several occasions. Required: 1. Citing all relevant legislation and case law, advise Mr and Mrs Jones as to the income tax consequences of the below potential transactions: (a) The sale of the land by ABC Pty. Ltd.; and (b) The sale of the shares in the company by Mrs and Mrs Jones. In your answer you should particularly discuss whether the sale of the land and the sale of the shares would be regarded as assessable income and any potential capital gains tax consequences arising from the scenario. Please mention if there is any additional information you would need from Mr and Mrs Jones to provide a more precise answer, and how this information would influence your advice.

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1 a The sale of the land by ABC Pty Ltd The sale of the land by ABC Pty Ltd would be considered a ca... View the full answer