- February 14, 2021 at 3:00 am #610297BurningdesireMember
- Topics: 14
- Replies: 14
I been doing cgt questions past papers and cake accross two section B questions for chattels where it sold for more than 6000 but cost less than 6000.
I knew the formula and still got the two questions wrong despite looking at mark schemes for the first question before doing the second.
My mistake was using wrong gross proceeds figure. One question states painting sold for 5900 after auctioneer fees of 656 so what they did was add them up And used it as gross proceeds-but I don’t understand why? I mean for my answer I used 5900 as gross proceeds.
The other question was sold paining for 6400 and incurred selling fees of 350 and the gross proceeds used was 6400?
My question is why not add 350 to 6400 proceeds like we did with the first question?
Thanks this should help me work out chattel questions much better as I know the information, just confused what to use for gross proceedsFebruary 14, 2021 at 4:25 pm #610401Tax TutorMember
- Topics: 2
- Replies: 3965
You are not reading the questions properly.
Gross proceeds are before deduction of selling expenses as shown in the examples within the study notes and lectures.
Look at the wording used above:
“painting sold for 5900 AFTER auctioneer fees of 656” – so we must add back those fees to the net proceeds figure given to get the required figure of gross proceeds
In the second example you are told that the painting was sold for 6,400 – this is the gross proceeds BEFORE any deduction of the selling expenses that were incurred
The gross proceeds are simply what you sell the asset for – before deducting any selling expenses incurred
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