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You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1051965769056

Date of advice: 30 June 2022

Ruling

Subject: CGT - land subdivision - isolated transaction for profit

Question 1

Will the sale of the subdivided lots of land be treated as statutory income under the capital gain provisions in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Will the profit from the sale of the subdivided lots be assessable as ordinary income under section 6-5 of the ITAA 1997 as a result of you carrying on a business?

Answer

No.

Question 3

Will the profit from the sale of the subdivided lots be assessable as ordinary income under section 15-15 of the ITAA 1997 as a result of an isolated transaction carried out for profit and commercial in character? If so, what date would the original intention have changed?

Answer

Yes from when the plans to subdivide began

Issue 2 - Small Business Concessions - retirement exemption

Question 4

Will you be eligible to apply the small business retirement exemption under section 152-305 of the ITAA 1997 to the profit on the sale of lot X?

Answer

Yes.

Issue 3 - Goods & Services Tax (GST)

Question 5

Is the supply of the first lots a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Question 6

Is the supply of the other lots a taxable supply under section 9-5 of theGST Act?

Answer

Yes.

This ruling applies for the following periods:

Financial year ended 30 June 20XX

Financial year ending 30 June 20XX

Financial year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Ownership of the Property (known as Property 1 and Property 2)

You and your spouse acquired land after 19 September 1985. This is referred to as Property 1. Additional land was acquired later. This is referred to as Property 2. You are the owners on these titles as joint tenants.

History of the Property (known as Property 1 and Property 2)

You repaid the mortgage before building your new home on Property 1. The strategy was to live in part of the house and run a business from the other part.

During the mid-19XXs, you commenced another business which was run from a building on the property.

You purchased Property 2.

You became aware that your neighbours had approached the Council to have the zoning altered for their acreage, including your own property to Residential. The council informed you that they did not have to inform you about re-zoning of land.

Over the years you contemplated a number of options in relation to your property.

You were advised that the potential maximum income from the business to be an insufficient return on investment for someone purchasing the real estate.

You were also advised that your property is short of being a desirable size for an aged care provider.

You and your spouse are over 55 years of age. With your children grown up and left home, working on this property for many years, you are seeking to reduce your workload and eventually retire.

You have a minimal amount of superannuation and your plans to sell one of the businesses to fund your future full-time retirement will not be realised.

The subdivision

You decided to undertake a subdivision of your property which is zoned as low density residential.

The proceeds would fund your future retirement.

On or around 20XX you decided to implement this option.

Your intention is to sell some lots and retain your existing residence and amenity, and space for the relocation of one of the business premises to continue the business.

You engaged a firm to undertake the tasks in relation to the subdivision, including liaise with the utility firms and contractors. There are a number of stages to the subdivision.

You do not plan to proceed with the last stage as this is your retained land that contains buildings including your home.

Financing and Costs

The total cost to date for the preparation ready for sale of Lots X and X were financed by the owners, not borrowed funds. You intend to secure funding from a commercial lender for the other stages and the loan will be secured by the property.

Sales

Lots X and X have been sold.

You advised your neighbours, friends and customers of your decision to close the business prior to commencing your development application with the council. Numerous local families approached you who were extremely keen to purchase a block from you.

Total anticipated sales revenue for the lots apart from the last stage is anticipated to be $X.

GST and tax treatment

The partnership is registered for an ABN and registered for GST.

The partnership has treated the supply of the first lots as a taxable supply, lodged a BAS and paid GST.

Input tax credits have been claimed in the business activity statements.

Invoicing and Payments

Invoices for the subdivision are raised by the contractors to you. The payments for the civil works are forwarded through the firm you engaged for assessment and approval.

The net value of your CGT assets has been determined as less than $X million. (There are no affiliates or any other connected entities. You do not own any other CGT assets.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 subsection 6-5(2)

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 section 15-15

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 subsection 112-25(2)

Income Tax Assessment Act 1997 Division 115

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-15

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-305

Income Tax Assessment Act 1997 subsection 995-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-20(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

Reasons for decision

Issue 1 - Income Tax & Capital Gains Tax (CGT)

Questions 1, 2, and 3

Summary

The proposed sale of the subdivided properties is a profit-making transaction and the gain is assessable under section 15-15 of the ITAA 1997.

Detailed reasoning

Assessable income

Generally, an amount received in relation to subdividing land would be assessable either as:

•         ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as business income,

•         ordinary income under section 15-15 of the ITAA 1997 as an isolated commercial transaction with a view to a profit, or

•         statutory income under the capital gains tax (CGT) provisions contained in Part 3-1 of the ITAA 1997 as a mere realisation of a capital asset.

Ordinary income

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Carrying on a business of property development

Section 995-1 of the ITAA 1997 states the term 'business' includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee.

Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? provides some factors that indicate whether or not a business is being carried on. The question of whether a business is being carried on is a question of fact and degree.

Based on the information provided, we do not consider that any proceeds you would receive from the sale of the subdivided lots would be derived in the course of carrying on a business.

Profits from an isolated transaction

Profits arising from an isolated commercial transaction will be ordinary income if the purpose or intention in entering into the transaction is to make a profit, even though the transaction may not be part of the ordinary activities of a taxpayer's business (FC of T v Myer Emporium Ltd 1987 163 CLR 199; 87 ATC 4363; 18 ATR 693).

Taxation Ruling TR 92/3 Income tax: whether profits on isolated transactions are income provides guidance in determining whether profits from isolated transactions are ordinary income and assessable under section 15-15 of the ITAA 1997.

The term isolated transaction refers to:

•         those transactions outside the ordinary course of business of a taxpayer carrying on a business; and

•         those transactions entered into by non-business taxpayers.

If a taxpayer not carrying on a business makes a profit from an isolated transaction or operation, that profit is assessable income if both of the following elements are present:

•         the intention or purposes of the taxpayer in entering into the transaction or operation was to make a profit or gain; and

•         the transaction or operation was entered into and the profit was made in carrying out a business operation or commercial transaction.

Profit-making does not need to be the sole or dominant purpose for entering into the transaction. A profit-making purpose must exist at the time the transaction or operation was entered into. Whether an isolated transaction is business or commercial in character will depend on the circumstances of each case.

In your situation you held the land that you purchased a while ago. You have in recent years, due to various factors, decided to subdivide and sell off many of the subdivided lots. You have already sold some lots.

Although you are not in the business of property development, to decide if any profit you make is ordinary income, we need to consider if the transaction was entered into, and the profit was made in carrying out a commercial transaction.

Paragraph 13 of TR 92/3 lists the following factors which are relevant in determining whether an isolated transaction amounts to a business operation or commercial transaction:

  1. the nature of the entity undertaking the operation or transaction;
  2. the nature and scale of other activities undertaken by the taxpayer;
  3. the amount of money involved in the operation or transaction and the magnitude of the profit sought or obtained;
  4. the nature, scale and complexity of the operation or transaction;
  5. the manner in which the operation or transaction was entered into or carried out;
  6. the nature of any connection between the relevant taxpayer and any other party to the operation or transaction;
  7. if the transaction involves the acquisition and disposal of property, the nature of that property; and
  8. the timing of the transaction and the various steps in the transaction.

In contrast, paragraph 36 of TR 92/3 notes that the courts have often said that a profit on the mere realisation of an investment is not ordinary income, even if the taxpayer goes about the realisation in an enterprising way. However, if a transaction satisfies the elements set out above it is generally not a mere realisation of an investment.

Paragraphs 41 and 42 of TR 92/3 outline that where a taxpayer acquires an asset with the intention of using it for personal enjoyment but later decides to venture or commit the asset into a profit-making undertaking or scheme with the characteristics of a business operation or commercial transaction, the activity of the taxpayer constitutes the carrying on of a business operation or commercial transaction carrying out a profit-making scheme, as the case may be. The profit from the activity is income even though the taxpayer did not have the purpose of profit-making at the time of acquiring the asset.

In addition to the above factors, for the purposes of determining whether the activities undertaken in relation to real property and development equate to a profit-making undertaking or scheme, Miscellaneous Taxation Ruling MT 2006/1 aligns itself with TR 92/3 and provides a list of factors which, if present may be an indication that a business or profit-making undertaking or scheme is being carried on.

The factors listed in paragraph 265 of MT 2006/1 are as follows:

•         there is a change of purpose for which the land is held;

•         additional land is acquired to be added to the original parcel of land;

•         the parcel of land is brought into account as a business asset;

•         there is a coherent plan for the subdivision of the land;

•         there is a business organisation - for example a manager, office and letterhead;

•         borrowed funds financed the acquisition or subdivision;

•         interest on money borrowed to defray subdivisional costs was claimed as a business expense;

•         there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and

•         buildings have been erected on the land.

No single factor will be determinative rather it will be a combination of factors that will lead to a conclusion as to the character of the activities.

Numerous cases have considered the assessability of profits or proceeds from the sale of land. As displayed in Whitfords Beach case (1982) 150 CLR 355, Statham & Anor v Federal Commissioner of Taxation 89 ATC 4070; 20 ATR 228 (Statham's case), Casimaty v FC of T 97 ATC 5135 (Casimaty's case) and Stevenson v FC of T (1991) 91 ATC 4476; (1991) 22 ATR 56; (1991) 29 FCR 282, a taxpayer can embark on a profit-making scheme after property was acquired for a different purpose.

In determining whether activities relating to isolated transactions are a profit-making undertaking, it is necessary to examine the facts and circumstances of each particular case. This may require a consideration of the factors outlined above; however there may also be other relevant factors that need to be weighed up as part of the process of reaching an overall conclusion.

Application to your circumstances

In your case, you are individual taxpayers who acquired the land more than 20 years ago. You have used the property as your main residence and to run your businesses from.

In the context of considering the above authorities and factors when determining whether your project would be viewed as a profit-making undertaking, the following general observations have been made:

•         there is a coherent plan for the subdivision of the property into lots which is more complex than what would have been involved in the disposal of the land as a whole;

•         you made the decision to subdivide the whole property unlike the taxpayer in the Casimaty's case who subdivided his property in pieces and had never contemplated subdividing the whole property;

•         there has been a change in the nature of the property with the proposed subdivision transforming the property from the existing land into smaller lots for new residential housing purposes;

•         there has been a change of purpose for which the land is held in that you are subdividing and selling the majority of the property for profit while maintaining a portion for your private and business use;

•         you have not been involved in similar activities in the past;

•         total sales revenue is anticipated to be $X million;

•         the total cost for the sale is X;

•         there is a demonstrated intention to profit from the subdivision of the property and the transaction has been undertaken in a commercial manner;

•         the subdivision of the first lots occurred concurrently;

•         you will incur significant expenses to undertake the subdivision of the rest of the property;

•         you will borrow funds to finance the development, using the property as security;

•         the sale of the lots has commenced; and

•         you engaged the services of a third party professional firm to undertake the various activities in relation to the subdivision.

A balanced view of these observations, with no one feature being determinative in isolation, reasonably leads to a conclusion the intention for holding the property has changed to a profit-making undertaking.

Although the property was your main residence for many years, the intention in relation to the property changed when you committed to this undertaking in relation to the subdivision of the property and the sale of the lots and engaged the professional firm. The decision to pursue the subdivision shows your choice to engage in exposure to the risks of the development, including the profits, losses and its general success for the purpose of maximising the potential profit made on the sale of the lots. You are funding the subdivision through your own finances but you will secure funding for later stages. You are incurring significant expenses.

Your situation is not like the Casimaty's case as you have a coherent plan and plan to subdivide the whole property as opposed to the piecemeal subdivision of the property undertaken in that case. Additionally, your situation is not the same as the Statham's case where the council had undertaken all of the work relating to the subdivision of the property as they will manage and control the project, engaging the services of the relevant entities to undertake the activities arising in relation to the project.

It is viewed that your subdivision activity is of a sufficient scale to characterise it as a commercial or profit-making undertaking. It is acknowledged that the extent of your personal involvement was minimal. However the professional firm is undertaking the organisation and management of the activities on your behalf. The activities go beyond a private family arrangement.

We have determined that based on the facts of this situation that the project is a profit-making commercial undertaking and the profits from the sale of the lots are considered to be ordinary assessable income under section 6-5 of the ITAA 1997.

Capital gains tax

Under section 6-10 of the ITAA 1997, assessable income also includes statutory income. Capital gains are included as assessable income under section 102-5 of the ITAA 1997.

Section 102-20 of the ITAA 1997 states that a capital gain or capital loss is made only if a CGT event happens to a CGT asset. The property is a CGT asset (section 108-5 of the ITAA 1997).

CGT event A1 happens if you dispose of a CGT asset.

When a CGT asset (the original asset) is split into 2 or more assets (the new assets), such as when land is subdivided, the subdivision of the land into subdivided lots is not a CGT event (subsection 112-25(2) of the ITAA 1997). Each new subdivided lot will be viewed as having been acquired on the same date that the original asset was acquired. The cost base of the original asset is apportioned between the newly created assets.

Section 118-20 of the ITAA 1997 contains anti-overlap provisions which operate to reduce any capital gains by any amounts which are included in your assessable income under a provision of the ITAA outside of Part 3-1 as a result of the sales.

Application to your situation

Making an overall assessment on the factors set out in TR 92/3, as done above in the previous question, it is the Commissioner's view that the subdivision and sale of the lots is more than a mere realisation of capital assets.

As highlighted above, the disposal of the lots are an isolated transaction and any profit made on their sale is included in your assessable income under section 15-15 of the ITAA 1997.

CGT event A1 will occur on the disposal of your ownership in each of the lots. The capital gain for each event is worked out by comparing the cost base of the asset with the capital proceeds for its disposal. Where the conditions under Division 115 of the ITAA 1997 are met, the capital gain can be reduced by 50% by applying the CGT discount.

Any capital gain made on the disposal of the lots will be reduced to the extent that the profit from the sale of the sale lots is included in your assessable income under section 15-15 of the ITAA 1997.

Issue 2 - Small Business Concessions - retirement exemption

Question 4

Small business CGT retirement exemption for a later lot

You may choose to disregard all or part of a capital gain under the small business CGT retirement exemption if you satisfy certain conditions. If you are an individual who chooses the retirement exemption, you do not need to terminate any activity or cease business. This concession allows you to provide for your retirement.

Subsection 152-305(1) of the ITAA 1997 explains that if you are an individual, you can choose to disregard all or part of a capital gain if:

•         you satisfy the basic conditions

•         you keep a written record of the amount you chose to disregard (the CGT exempt amount), and

•         if you are under 55 years old just before you choose to use the retirement exemption, you make a personal contribution equal to the exempt amount to a complying superannuation fund or retirement savings account (RSA)

Under the small business CGT concessions, a capital gain that a taxpayer makes on a CGT event happening to a capital asset may be reduced or disregarded if the taxpayer satisfies the basic conditions of the maximum net asset value test or is a CGT small business entity for the income year, and the CGT asset satisfies the active asset test (section 152-10 of the ITAA 1997).

A CGT asset satisfies the active asset test if the asset was an active asset of a taxpayer for at least seven and a half years (where it was owned for more than 15 years). The period begins when you acquired the asset and ends when the CGT event occurs (section 152-35 of the ITAA 1997).

The maximum net asset value test is satisfied if the net value of the CGT assets of you, your affiliates, and connected entities does not exceed $6 million (section 152-15 of the ITAA 1997).

If you satisfy both the maximum net asset value test and the active asset test, the basic conditions for the small business concessions are satisfied (a).

Application to your circumstances

You stated that the net value of the CGT assets of you, your affiliates, and connected entities is $XXX, so does not exceed the $6 million to be eligible for this exemption. You are both over 55 years old. The lot was used to run the business.

You satisfy all of the conditions for the small business retirement exemption in section 152-305 of the ITAA 1997 for this lot.

Issue 3 - Goods & Services Tax (GST)

Questions 5 and 6

Section 9-40 of the GST Act provides that you are liable for GST on any taxable supplies that you make.

Section 9-5 of the GST Act provides you make a taxable supply if:

a)    you make the supply for consideration; and

b)    the supply is made in the course or furtherance of an enterprise that you carry on; and

c)    the supply is connected with the indirect tax zone; and

d)    you are registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Based on the facts the supplies of vacant land are not GST free or input taxed and you satisfy paragraphs 9-5 (a), (c) and (d).

We will now consider whether the supplies of subdivided lots are made in the course or furtherance of an enterprise that you carry on as per paragraph 9-5(b) of the GST Act.

If this paragraph is satisfied, then the supply of the subdivided lots are taxable supplies.

Enterprise

Subsection 9-20(1) of the GST Act provides that the term 'enterprise' includes, among other things, an activity or series of activities done:

•         'in the form of a business' (paragraph 9-20(1)(a))

•         'in the form of an adventure or concern in the nature of trade', including isolated or 'one-off' transactions (paragraph 9-20(1)(b)).

Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number provides the meaning of enterprise for the purposes of entitlement to an ABN. Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? provides that the discussion in MT 2006/1 equally applies to the term enterprise as used in the GST Act and can be relied on for GST purposes.

Paragraph 159 of MT 2006/1 discusses how to determine the extent to which an activity or a series of activities amounts to an enterprise:

159. Whether or not an activity, or series of activities, amounts to an enterprise is a question of fact and degree having regard to all of the circumstances of the case.

Furthermore, paragraph 160 of MT 2006/1 discusses the need to identify all the relevant activities in order to determine the existence of an enterprise:

160. It is important that the relevant activity or series of activities are identified in order to determine whether an enterprise is being carried on. This is because one activity may not amount to an enterprise but that activity taken into account with other activities may form an enterprise. All activities need to be taken into account including activities from the commencement to the termination of the enterprise. For further information on commencement and termination activities, see paragraphs 120 to 148 of this Ruling.

Paragraph 178 of MT 2006/1 discusses the main activities to consider where an enterprise is done in the form or a business for the purposes of paragraph 9-20(1)(a).

178. TR 97/11 discusses the main indicators of carrying on a business. Based on that discussion some indicators are:

•         a significant commercial activity;

•         a purpose and intention of the taxpayer to engage in commercial activity;

•         an intention to make a profit from the activity;

•         the activity is or will be profitable;

•         the recurrent or regular nature of the activity;

•         the activity is carried on in a similar manner to that of other businesses in the same or similar trade;

•         activity is systematic, organised and carried on in a businesslike manner and records are kept;

•         the activities are of a reasonable size and scale;

•         a business plan exists;

•         commercial sales of product; and

•         the entity has relevant knowledge or skill.

Paragraph 179 of MT 2006/1 provides 'there is no single test to determine whether a business is being carried on'. Paragraph 12 of TR 97/11 states that 'whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighing all the relevant indicators'.

Application of the facts to your circumstances

You registered for an ABN and registered for GST as a Family Partnership. You have also operated another business from the property as a Partnership.

Weighing up all of the facts and circumstances, with no one test being determinative, it is the Commissioner's view, the Partnership is the entity carrying on a property development enterprise of land development, subdivision and sale of fully serviced vacant lots.

While holding an asset for a considerable period of time may indicate that it is a long-term capital or private asset, the intention of the taxpayer at the time of acquisition, including any subsequent change in intention or use of the asset is an important consideration.

In your case Property 1 and 2 were acquired for a business purpose and a private purpose and held for a period of more than 20 years. Both properties are considered a capital asset for this period, used as a business asset with respect to the businesses. Property 1 has been used as a private asset as your family home, and Property 2 was used to some extent for leisure activities.

You made the decision to change the use for which both properties were originally acquired, to land development, subdivision and sale, while retaining some land for your private and continued business use. We consider you had both the purpose and intention to engage in a property development undertaking.

While no specific business plan is in existence, you have engaged in a series of activities in a manner that is planned and organised with a view to profit. These activities support your intentions to engage in a property development. The extent of your activities and the way in which they have been carried out are strong factors concluding your venture is an enterprise. The schedule of works to be undertaken to develop your land is detailed resulting in improvements that is not insignificant. This is contrast to where minimal activity is.

Based on the facts presented you had an intention to make a profit from this development and based on anticipated costs and revenues, there was an expectation from the start that the development will be profitable.

When looking at the profitability and financing for this development, you have full exposure in terms of the risks associated with development activities and with respect to making profits or losses on sales. The level of investment required to realise the anticipated net amount of $X million is not insignificant and points to you carrying on this property development that is of sufficient size and scale undertaken in a commercial way.

To ensure expenditure and revenues are documented, you have taken the step to maintain records.

Maintaining records for the purposes of providing information to your accountant to prepare the relevant BAS are activities typically undertaken by those who carry on business or for a business-related purpose. This step supports your intention to change the use of the land to land development and subdivision.

The claiming of input tax credits on acquisitions in the partnership BAS that relate to this development is evidence that you intended to carry on an enterprise.

In consideration of the above factors, and notwithstanding the length of time the land has been held for both private and business purposes, the Commissioner considers your activities and the extent of these activities with respect to the property development is an enterprise as defined for GST purposes. The level of development exceeds that of a mere realisation of the land.

There is a change of purpose for which the property was initially held and subsequent coherent plan of steps to implement that plan in order to improve the land for property subdivision and sale. You engaged professional services to design the best subdivision proposal, engaged contractors to perform works, considered risk and rewards that the development would be profitable, secured finance and kept and maintained records for taxation and other purposes.

The extent of your activities is consistent with operating an enterprise with the view to making a profit.

Your supplies of the lots are in the course or furtherance of an enterprise that you are carrying on as per paragraph 9-5(b).

As you satisfy all of the elements of section 9-5 of the GST Act your supplies will be taxable supplies.

Contention

You do not consider that the land was sold in the course of a business nor was the land purchased and sold as part of a profit-making undertaking. You consider that the sale of the lots is a mere realisation of capital assets and is taxable as a capital gain and not as ordinary income. You refer to Statham's case and McCorkell v FCT 98 ATC 2199 in support of your position.

We accept you did not acquire the land for a profit-making purpose at that time. It is our view that the development and sale of lots is an enterprise and not the mere realisation of a capital asset.

Paragraph 264 in MT 2006/1 provides the cases of Statham's case and Casimaty's case provide some guidance on when activities to subdivide land amount to a business or a profit-making undertaking or scheme. In these cases, farmland was subdivided and sold. Minimal development work was undertaken to meet council requirements and to improve the presentation of certain allotments. On the particular facts of these cases the courts held that the sales were a mere realisation of a capital asset.

We consider Statham's case is not on foot with the facts and circumstances presented in your property development enterprise.

We do not consider your small lot subdivision and not advertising through a commercial real estate agent to sell your lots, prevent your property development from being an enterprise, when weighed up against other factors.