Personal Tax help please!!

Caff

Hi, I have a quick question about shares and the matching rules. If someone could help that would be great :001_smile:

1 June 1989 Bought 4000 shares for £8000
30 July 1996 Bought 1800 shares for £9750
20 March 2004 Bought 1000 shares for £8500
15 March 2012 Sold 3500 shares for £36000
20 March 2012 Bought 400 shares for £3900

Show the balance of shares, and their value, to carry forward, calculate the gain made on these shares.

Thank you once again for helping :001_smile:

reader

Caff wrote: »

Hi, I have a quick question about shares and the matching rules. If someone could help that would be great :001_smile:

1 June 1989 Bought 4000 shares for £8000
30 July 1996 Bought 1800 shares for £9750
20 March 2004 Bought 1000 shares for £8500
15 March 2012 Sold 3500 shares for £36000
20 March 2012 Bought 400 shares for £3900

Show the balance of shares, and their value, to carry forward, calculate the gain made on these shares.

Thank you once again for helping :001_smile:

In terms of the matching rules you should dispose of shares in the following order:

1) First get rid of any shares that were bought on the same day of the sale (in the question above, no shares have been bought on the same day as the sale so we can ignore this rule)

2) Secondly we have to get rid of any shares that were bought 30 days after the date of sale (which is 15/03/2012). This rule does apply because there was a purchase on 20/03/2012.

3) Finally, because we still need to get rid of another 3,100 shares (3,500 shares sold - 400 shares bought 30 days after the sale) we need to 'pool' or group together all the other share purchases, find an average share price, and then multiple this average share price by 3,100.

So.................................

Average share price in pool = (£8,000 + £9,750 + £8,500) / (4,000 shares + 1,800 shares + 1,000 shares) = £26,250 / 6,800 shares = £3.86 / share

Therefore 3,100 shares = £3.86 x 3,100 shares = £11,966

So altogether 3,500 shares cost = £3,900 (from the 20/03/12 purchase) + £11,966 (from the pool) = £15,866

We sold those 3,500 shares for £36,000 (as per the question)

Therefore capital gain = £36,000 - £15,866 = £20,134

As for the balance of the shares in the 'pool', well we had 6,800 shares in the pool but got rid of 3,100 shares so we only have 3,700 shares left in the pool. And the value of those shares will be £26,250 (original value) - £11,966 (the value of the 3,100 shares we got rid of) = £14,284.

(You might have slightly different answers in your book due to the rounding when I calculated the average share price in the pool to be £3.86).

Caff

Thank you :001_smile: