1 Alice is in business as a sole trader. On 13 May 2015, she sold a freehold warehouse for £184,000, and this
resulted in a chargeable gain of £38,600. Alice purchased a replacement freehold warehouse on 20 May
2015 for £143,000. Where possible, Alice always makes a claim to roll over gains against the cost of
replacement assets. Both buildings have been, or will be, used for business purposes by Alice.
What is the base cost of the replacement warehouse for capital gains tax purposes?
Ask the Tutor ACCA TX-UK
explain plz
If you worked through the OT course notes with the associated lectures you would be able to answer most of your questions yourself.
What do you think is the answer?
in answer put
chargeable gainn in 2015/2016=lower of
1 all of the chargeable gain=£38600
2 sales proceeds not reinvested=£184000-£143000=£41000
as all the gain is chargeable in the tax year 2015/2016 , no rollover relief claim is possible
accordingly the base cost of the replacement asset is the actual cost of £143000
BUT I DONT UNDERSTAND
This is exactly the point that I am making, if you listen to the lecture on chapter 14 CGT reliefs in conjunction with the OT course notes - specifically example 4 in Chapter 14 then you should have been able to work the answer or at least understand the answer provided.
Please use the notes and lectures before attempting the questions.
Sir, regarding the above question. The chargeable gain made is bigger than the gain made on sales proceed. Since the base cost is cost of replacement asset - rollover available. Will it be correct to calculate negative rollover as follow???
It seems gain is not eligible for roll over, and no adjustment to base cost. Therefore base cost remain £143,000.
There is no negative rollover - if insufficient proceeds are reinvested then there is no rollover and the base cost is untouched - again I would you to also read the OT notes in conjunction with the lectures
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