BTC Q. page 4.29 of osborn book

Options
Primble
Primble Registered Posts: 734 Epic contributor 🐘
Hi

I was doing some questions and ten realised that the answer for this one wasn't in the back so was hoping poeple could mark it for me.

Aye ltd made the following disposals in March 2009 whichwere the only disposals during CAP y/e 31/12/2009

It sold a factory for £500,000 that had been used since purchase in sept 1986 for £300,000

it sold part of a piece of land for £30,000 that it had brought in 1992. the whole piece had cost £50,000 at that time. the remaining land was valued at £120,000.

indexation factors were Sept 1986 to March 2009 1.150
and jan 1992 to march 2009 was 0.558
calculate the chareable gains arising from the two disposals.

i got for building
Proceeds £500,000
less cost (£300,000)
=unindexed gain £200,000
indexation (345,000)
=loss (145,000)

then land
Proceeds £30,000
less cost (10,000) *see working below
=unindexed gain £20,000
indexation (5580)
= Chargeable gain £14420

but i wanted to do 14420-14500= (130580) t get the total

*workings for above 50,000 x (30000/150,000)

am i close. hopefully the people doing this in class will have an answer for me

Comments

  • jojoscottison
    jojoscottison Registered Posts: 21 New contributor 🐸
    Options
    building
    Proceeds £500,000
    less cost (£300,000)
    =unindexed gain £200,000
    indexation (345,000)
    =loss (145,000)

    This is wrong!
    though the indexation allowance is 345000 here ,you should only deduct 200,000,which makes no capital gain in the proceed of sale of the building,because the indexation allowance cannot either turn an unindexed gain into a loss ,or increase the amount of an unindexed loss.

    land
    Proceeds £30,000
    less cost (10,000) *see working below
    =unindexed gain £20,000
    indexation (5580)
    = Chargeable gain £14420

    this is right! so the total capital gain is 14420+0=14420
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
    Options
    building
    Proceeds £500,000
    less cost (£300,000)
    =unindexed gain £200,000
    indexation (345,000)
    =loss (145,000)

    This is wrong!
    though the indexation allowance is 345000 here ,you should only deduct 200,000,which makes no capital gain in the proceed of sale of the building,because the indexation allowance cannot either turn an unindexed gain into a loss ,or increase the amount of an unindexed loss.

    land
    Proceeds £30,000
    less cost (10,000) *see working below
    =unindexed gain £20,000
    indexation (5580)
    = Chargeable gain £14420

    this is right! so the total capital gain is 14420+0=14420

    doh silly me getting carrid away! thanks
Privacy Policy