Part disposal and PTC: disposal costs in relation to Chargeable Gains

pirate

Hi there

this is on the PTC
I have a piece of land that I bought for £41500

I sell 4 acres of it which leaves 6
I sell it for 38000, and there were £3000 of costs in the sale. the remainder is valued at £48000

I know the formula is orginal costs X Proceeds/Proceeds+market value of part remaining

In this case is the proceeds in the calculation 38000 less £3000 or £38000

many thanks

Karen

wonderwife2008

You can always deduct any associated selling costs from the proceeds as part of a capital gains calculation.

pirate

Hi Wonderwife2008

Ok so does that mean in the formula that I use to calculate the cost of the item (becuase it a part disposal) do I use £38000 or £35000

thanks

meibaker

i think you should use 35000

wonderwife2008

Ah my age old problem of misreading the question ...

don't deduct the selling costs from the proceeds used in the calculation to find the original cost

ONLY deduct the selling costs in the capital gains calculation

agatha

in the formula you should use 38,000 so it would look like this 41,500 x 38,000/38,000 +48,000 which will give you 18,337
Proceeds -38,000 less cost of sale 3,000 will give you net proceeds of 35,000 and from that figure deduct cost of that plot you sold which is 18,337 the result is 16,663 which is the chargeable gain (i think!)

pirate

ok thanks now need to drill in my head lol
at my age big problemo

meibaker

can you explain why please?
arent we losing out 3.000?

wonderwife2008

No because the £3000 is deducted from the PROCEEDS in the capital gains calculation NOT the formula used to calculate the percentage of original cost

meibaker

ahhh, i see. thanks a lot for the information!

agatha

exactly, the formula to compute chargeable gains looks as follow:
Disposal LESS incidental cost of disposal= Net proceeds LESS cost =Chageable gain

cost of disposal has nothing to do with calculating the cost of asset or part of the asset