Assignment

Case study

Dr Ray Cummings is a general practitioner whose clinic is located in Camberwell, at a property which he inherited in 1984. The property, currently valued at $3,500,000, has a land size of 900 square-meters with a 5-bedroom house. As Dr Cummings is approaching his retirement age, he reduced his practicing hours and the house became oversized for his practice.

As land in this suburb is in high demand, Dr Cummings decided to sell the property and relocate to smaller offices in the city. Advised by real-estate agents, in August 2015 he subdivided the land into two blocks ("Block A" and "Block B"), which were sold as follows:

Block A, where the original house remained, was sold for $2,000,000 in March 2016

On Block B he built 3 units at a cost of $750,000 each unit. In April 2016, two units were sold for a price of $950,000 each, and in May 2016 the third unit was sold for $860,000.

By the 30 June 2016 Dr Cummings had only received the proceeds of the original house and the first two units totalling $3,900,000.
Required

Advise Dr Cummings of the tax consequences of the above transactions for the year ending 30 June 2016.

Word limit: 2,000 words