Capital Gains - Shares : 1 for 2 rights issue

LTLee Taylor12y ago

Good evenining, i am having difficulty in calculating the following Question: 3,500 shares in ABC plc were sold for 9,800. Jay had purchased ABC plc shares at the following times; May 2008 – 1,000 shares costing 1,600 GBP Aug 2009 2,000 shares costing 3,600 GBP “MAY 2010 – 1 for 2 RIGHTS ISSUE TAKEN UP, COSTING 2.20 GBP PER SHARE” how can i calculate the last purchase in may 2010? thanks Lee

AAJS9012y ago#1

I'm not a tutor but I've seen your question so thought I'd jump in. A 1 for 2 rights issue means that a shareholder has a right to buy, at a discounted price, 1 additional share for every 2 that they currently own. In your example the shareholder owns 3000 shares (May + August purchases) so they are able to buy 1500 shares at £2.20. So the total cost of the purchase is 1500 x £2.20 = £3300. Hope this helps and good luck in the exam!

TTTax Tutor12y ago#2

Yes the rights issue is just another purchase computed as above to be added into the share pool