A man buys a farm with agricultural use. He arranges a zoning change and splits the plot in two. He sells one half at a profit and keeps the other. The inspector taxes the increase in value as income from other activities. The court agreed. Those who actively work on zoning plans are doing more than normal asset management.
From welfare benefit to property project
A man on welfare benefits sees a farm for sale in 2017 that has not found a buyer for years. The farm is zoned agricultural, making it suitable only for a farmer with a business. The man smells an opportunity. He calls the municipality and learns that it is willing to cooperate on a zoning change. Even better, the space-for-space scheme allows him to demolish the old greenhouses in exchange for an extra building plot. The man engages a legal planning agency, commissions studies and buys the farm, on the resolutive condition that the zoning change succeeds, for €510,000.
Split and sell
In June 2018, the time has come. The municipality approves the new zoning plan. The farm is now split into two plots, each with residential zoning. The building plot the man immediately puts up for sale for €550,000. More than the purchase price of the whole. No buyer comes forward for the plot, but he does for the farmhouse itself. The man sells that for €550,000. He keeps the plot for now, with plans to build there one day. One problem: he has no money. The delivery becomes an ABC transaction, with the sale proceeds from the farm directly financing the purchase.
No normal asset management
The inspector sees it differently. The increase in value is the direct result of the husband's activities. That is not normal asset management, but a taxable activity. The court agrees. Anyone who initiates a zoning change, commissions studies and coordinates progress is doing more than a passive investor. The fact that the man subcontracted the work does not matter. The third-party work is attributed to him. The moment the man decides to keep the plot, he ceases the activity and has to settle the increase in value.