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Hello Sir, I need your help with the following issues (which i have confusion on). I’ve just started with my F6 preparation (self studying)!
Case 1: Transfer between spouses
“the deemed proceeds of the transferor are treated as the deemed acquisition cost of the transferee (i.e. the repicient spouse acquires the asset at its original acquisition cost.”I am a bit confused about a different scenario like:
Acquisition cost of asset by Mr A – $80000; incidental cost of acquisition (e.g. legal costs) – $1500; enhancement cost of $25000
Total allowable expenditure = $106500If Mr A transfers the asset to his wife, Mrs A, what would be the deemed acquisition cost to the transferee?
Would it be: A. $80000 B. $105000 C. $106500
and if ever Mrs A sold the asset, what cost would be used to calculate chargeable gains?Case 2: Adjustment to basic tax rate band limit
I am confused on the treatment of the pension contribution as well as the gift aid donations (supposedly we need to use the ‘gross’ amount for adjustment)I wanted to know:
Why the logic behind the reason we add private pension contribution and why do we multiply by 100/80?
Is it only a formula or do we need to multiply (100/80) in case we have ‘net’ pension contibution to get the gross pension contribution?And lastly, if ever in a question, I get the net amount of gift aid donation, should I use this figure to adjust the basic band limit or I need to convert the net amount into gross amount and if so, how can we do it i.e. is there any specific formula for this conversion?
I apologize if ever I cause any inconvenience by asking so many questions.
Relying on your cooperation!
ThanksSorry, I forgot one additional part:
Concerning part disposal of asset:
When applying the formula:
Cost * [ (proceeds/ (proceeds + Market Value of remaining part) ]Does this cost only include the original cost of acquisition or does it also include only incidental cost of acquisition & enhancement?
1) what do you think is the answer?
2) both PPC and gift aid payments are made net of basic rate relief at source so unless the question states that the amount given is the gross figure you must always gross up the amounts paid by 100/80. Tax is a series of rules laid down in statute or agreed in case law – there isn’t a why it simply IS the rule – learn and apply is my advice!For a part disposal we apply the part disposal formula to all costs that relate to the entire asset, whereas we would deduct in full any cost that only related to the part now sold.
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