Problem: Brad Johnson purchased an investment property which was a two-bedroom house, in June 1981 for $73 000. In order to increase the value of the property and the rental income, Brad built an extension of two additional bedrooms with the same size to the original ones in September 1998 and incurred a total expenditure of $58 000. At the same time, he paid another amount of $20 000 to repair and redecorate the original two bedrooms, and he claimed deductions for this capital works expenditure during the 1998-99 income year. In July 2021, Brad sold this property for $785 000. At the time of sale, a licensed property valuer issued a report indicating that the land had a value of $460 000 and the balance is the value of the house, and the four bedrooms were in the same quality and condition. Furthermore, the market price for such an extension of two bedrooms was $160 000.
What are the tax consequences of the transactions? Provide an explanation with reference to the relevant law provisions and calculations.