Shares Question - HELP!!

Lolo BeanLolo Bean New MemberPosts: 13Registered
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!!!

Comments

  • ademooreademoore Well-Known Posts: 146Registered
    Haven't studied this kind of things in years, however, wouldn't you need to be looking at the value of each share on purchase, and then subsequent sale, to see gain or loss?
    E.g. April purchase, bought at £2.60 each (14560/5600), then January sale, sold at £2.90 (4060/1400) means a 30p gain.
    Then, I would draw up a table something like (excuse spacing!)
    Purchase 5600 @ 2.60 = 14560
    Sale (1400) @ 2.90 = (4060)
    Leaving 4200 @ 2.60 = 10920
    Purchase 2800 @ 2.20 = 6160
    Leaving 7000 = 17080
    Sale (7000) @ 2.86 (20000/7000) split as 4200 @ 2.60 and 2800 @ 2.20
    which is in effect, 4200 @ 26p gain and 2800 @ 66p gain.

    Hope that makes sense!
  • RichardRichard Trusted Regular Posts: 373Registered
    When an individual disposes of shares, they are matched in the following order

    1. Shares purchased same day as disposal
    2. Shares purchased in the next 30 days (FIFO)
    3. The Share Pool

    So the first disposal in January is matched against the purchase on 1st Feb, as there are no same day purchases, but shares are purchased within 30 days of the disposal.

    For the March disposal, there is no same day, nothing within 30 days, so the balance of the share pool must be used.

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