Shares Question HELP!!!!!!

Lolo Bean

I am stuck on this particular shares question, from the obsborne workbook for business tax.

Adam purchased and sold shares in Beeco ltd as follows:

15 April 2005 purchase 5600 shares for £14,560
12 January 2011. Sold 1400 shares for £4,060
1 February 2011. Purchased 2800 shares for £6,160
31 March 2011. Sold 7000 shares for £20,000

(a) the gain or loss on the sale of the shares on 12 january 2011 is:

(b) the gain or loss on the sale of the shares on 31 march 2911 is:

Please help, my head is bursting right now!!!

NicF

Haven't got a calculator handy so I can't work out the answers but you need to work out the cost of the shares sold on each date and then take that amount away from the amount they were sold for. I'd suggest drawing up a shares account thing (sorry can't remember the actual name) to work out the costs for the second sale.

The gain or loss on the shares sold in January would be 4060 -[(14,560/5600)*1400].

For the shares sold 31 March, 2800 of the shares would be at a cost of £6160. The remaining shares would be costed at e average of the cost of the shares you had remaining in the share account thing.

Sorry - think I've probably just confused even more with this. Have you checked the answer in the book?

twinks01

I think you would have to match the 1400 shares sold in January against some of the shares purchased in February. I think it is any shares purchased within 30 days after a sale that get matched before you take the cost from the pool? But the matching rules for shares owned by companies is different. I think.

Joe Barraclough

Hi
The answers provided by NicF are wrong sorry, When dealing with individual share disposals first you have to see if there were any purchases of shares 30 days AFTER the sale. So for Jan 2011 the shares will cost the same as the FEB 11 pruchase....so 2800/1400=2..... £6160/2=£3080...So the the loss for the jan 2011 sale is 4060-3080=£980

For march as there are no purchases of stock 30 days after this you would just tally up the rest of the costs and shares that haven't been sold so the cost for this sale would be 14560+3080(6160/2) = 17640 so therefore the loss for the second sale is 20000-17640= 2360

Hope this helps
ive subscribed so any questions just ask

p.s. note that these rules are different to those of companies share disposals

NicF

Joe Barraclough wrote: »

Hi
The answers provided by NicF are wrong sorry, When dealing with individual share disposals first you have to see if there were any purchases of shares 30 days AFTER the sale. So for Jan 2011 the shares will cost the same as the FEB 11 pruchase....so 2800/1400=2..... £6160/2=£3080...So the the loss for the jan 2011 sale is 4060-3080=£980

For march as there are no purchases of stock 30 days after this you would just tally up the rest of the costs and shares that haven't been sold so the cost for this sale would be 14560+3080(6160/2) = 17640 so therefore the loss for the second sale is 20000-17640= 2360

Hope this helps
ive subscribed so any questions just ask

p.s. note that these rules are different to those of companies share disposals

Joe's right about matching the shares - I hadn't looked at the dates properly. Lesson 1 in exam technique - always read the questions carefully. I did actually pass this exam so must have paid more attention to what I was doing than when answering here. Sorry for any confusion.

Nicola