Chattels 5/3 rule

hphil
hphil Registered Posts: 2
In my Osborne book. I am stuck on this question because an antique painting is sold for £300,000 that was originally bought for £60000. She had also spent £50,000 restoring the painting. As this is a Chattel sold at a gain for over £6000 why does the 5/3 rule not seem to apply in the answers?

It seems to not apply to all of the antique paintings in examples but does apply to any other antiques!

Comments

  • crispy
    crispy Trusted Regular SouthamptonRegistered Posts: 456
    Hi,
    I believe the 5/3 rule for chattels applies where the cost of acquisition is less than £ 6,000, in your example it was brought for £ 60,000.
  • PeterC
    PeterC Registered, Tutor Posts: 225
    Crispy is correct but you could apply the 5/3 rule, anyway. The actual gain is £190,000. The alternative is 5/3(300,000 - 6,000)=£490,000. The actual gain applies, as it is the lesser of the two.
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