Personal Tax - Practice CBE 2.7

Woooof

"John buys 10 acres of land for £20,000 in April 2000. He sells 2.5 acres of the land for £15,000 in January 2010 incurring auctioneer's costs of £1,000. The value of the remaining 7.5 acres is £40,000 in January 2010."

Can anyone explain how they get the answers of:

The cost of land sold is £5,455
The chargeable gain is £8,545

I am just confused

Nia

I've not started studying this subject yet, but from a logical point I would say:

cost of land sold = 20,000 x (15,000 / 55,000) = 5,455

chargeable gain = 15,000 - 1,000 - 5,455 = 8,545

Woooof

Thanks

Trying to remember everything that can come up in this unit is difficult, well in my opinion anyway.

shama72

Personal Tax

Hi woooof

I just sat my test yesterday and I had a similar question to that.
If you have Osborne book They gave you a formula
Original cost of whole asset X A/A+B
A is Proceeds of part disposed of
B is Market value of part retained

This is similar to Nia answer.

Woooof

I was being lazy and couldn't be bothered to go to my car to get my book