Gain or Loss on Shares

Liam_Jenkins_99Liam_Jenkins_99 Registered Posts: 6
Carol purchased and sold shares in Ceeco Limited as follows:
10 April 2002 - Purchased 5,000 shares for £15,000.
12 January 2017 - Sold 1,800 shares for £4,000.
1 February 2017 - Purchased 6,800 shares for £21,080.
31 March 2017 - Sold 10,000 shares for £40,000.

(1) What is the gain or loss on the sale of shares on 12 January 2017?

(2) What is the gain or loss on the sale of shares on 31 March 2017?

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,310
    What result do you get?
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,009
    Question 1
    Match shares sold with shares purchased in the next 30 days.
    Cost/share = £21,080/6,800 = £3.10
    Cost of 1,800 shares = 1,800 x £3.10 = £5,580
    Loss = £4,000 (proceeds) - £5,580 (cost) = -1,580

    Question 2
    S.401 Holding Pool
    Number of shares = 6,800 - 1,800 + 5000 = 10,000
    Cost = 21,080 - 5,580 + 15,000 = £30,500
    Gain = £40,000 (proceeds) - £30,500 (cost) = £9,500

    3 Sequential Rules:
    1) Match shares sold against shares bought on the same day.
    2) If the above is n/a, then match shares sold with shares bought in the next 30 days (see question 1 calculations).
    3) If the above is n/a, then setup a S.401 holding pool and calculate the average cost of the shares (see question 2 calculation).
    Liam_Jenkins_99
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