Nikki owns and carries on a chain of clothing stores. So far she has 7 of such stores.
When she chooses a premises to open a new store on, the most important criterion
is where she can maximise the sales of clothes. However, she is also influenced by
the potential for the land on which each of the shop premises is located on to grow
in capital value.
In late 2019, Nikki decides to develop one of the shop premises, because real estate
in the area which it is located on had appreciated markedly in recent years. This
involved Nikki obtaining a building approval from the local council, demolishing the
shop, and building a 6 storey apartment building on the land. As Nikki did not know
much about building, this consisted of contracting a major builder to be in charge of
the process of building the apartment. These apartments are sold individually to the
public through a leading real estate agent.
Ignoring Capital Gains Tax, discuss whether the sales proceeds from
the apartments generate ordinary income.