In March 2017, Profit Ltd. purchased 50 acres of rural land in Warrnambool, Victoria.At the time the land was zoned rural, but the directors of Profit Ltd. were aware thatthe land would increase in value and it was likely in the future that the land would bezoned as residential. In the company documents it wasted that the land wasacquired for the purpose of sheep farming. The sheep on the land were to be lookedafter, and the wool from the sheep to be sold to wool manufacturers.The selling of the wool was successful at first, but by about 2019 the demand for thecompany’s wool began to decline. In January 2020, at the next general meeting, theshareholders of Profit Ltd. decided that the wool growing business was no longersufficiently profitable to justify the company’s involvement in the business. At thesame time, the land had become ripe for development as the zoning rules hadchanged to permit subdivision. The directors of Profit Ltd. therefore decided to takethe steps required to have the land rezoned residential. To obtain council approval tosubdivide the land, Profit Ltd. was required to provide sewerage services and tocarry out electrical and water works, which were carried out over the next twelvemonths. The company was actively involved in the marketing of the land and hadsold all the subdivided blocks of land at a substantial profit by June 2021.Required: Advise Profit Ltd. of the income tax implications of the abovetransactions, referring to case law and sections of legislation where appropriate.LawSocial ScienceTax law BULAW 5916

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