Capital gain roll over - Surely the question isn't wrong?

jimbo123

I don't understand the answer given on the AAT mock exam for this question. It seems a couple of grand out, but surely I am just missing something?


Shop premises were bought for £525,000 in Jan 2005.
In Nov 2016 they were sold for £798,000.
In the same month another shop was bought for £700,000.
The amount of capital gain from the shop premises that can be rolled over is....

Answer is £175,000.

PeterC

Proceeds 798,000
less Cost 525,000
Gain 273,000
less Rollover 175,000
Chargeable 98,000 (= 798,000 - 700,000)

jimbo123

PeterC,

I appreciate your help but I don't understand what you are saying.

The question is asking what the roll over is. I thought roll over was the amount of gain that can invested in the new replacement. In this case it is 273,000 less the 100,000 difference with the new shop being cheaper than the one sold. This gives me an answer of 173,000 but the answer says it is 175,000.

For the answer to be 175,000 using my workings then the amount the building was sold for would need to be 800,000 not 798,000. I'm not sure what I am missing.

jimbo123

PeterC

What you say is nearly right but the new shop is cheaper than the one sold by £98,000 (798,000 - 700,000) not £100,000