Question:1) QUESTION 1 - Principles and Concepts (10 Marks)
Renovations Pty Ltd ("RPL") has been in the business of home renovation for over 30 years. Following a downturn in the renovations market however, RPL sought out new sources of income. In 2012, RPL decided to purchase old run-down houses in the inner-city, renovate them and lease them out for very high rents.
After some time, the directors of RPL decided that the company should again concentrate on its core business activity. Consequently, in the current tax year (2017/2018) RPL sold the houses it had renovated for rental and made large profits.
With reference to legislation and case law, advise RPL on the tax implications regarding the profits it made during the 2017/2018 tax year.
You are not required to undertake any capital gains calculations, the focus of this question is income principles and concepts only
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