Gains on disposal of shares

Hello Jilly,

In the following question the requirement was for the gain on disposal but not specifically asked for gain on cash consideration like what the model answer said.

So do we have to focus on the cash gain as a result of disposal in this case?

can you please clarify,

Thanks,

Neha purchased 50,000 shares in Enjoy Ltd. for £90,000 on 30 May 2005.

3 years later, Enjoy Ltd. was taken over by Sad Ltd.

Enjoy Ltd. shareholders received £3 cash and 2 Sad Ltd. ordinary £1 shares for every Enjoy Ltd. share

Immediately after the takeover Sad Ltd. shares were worth £1.20 each.

What is Neha’s chargeable gain as a result of the takeover?

£0
£150,000
£100,000
£180,000

Answer

The total consideration provided by Sad Ltd is:

MV Cost
£ £
Cash (50,000 « £3) 150,000 50,000
Shares (50,000 x 2 x £1.20) 120,000 40,000
270,000 90,000

Neha has made a part disposal in relation to the cash consideration.

Disposal proceeds (cash: 50,000 x £3) 150,000
Less: Original cost (£150,000/£270,000 x £90,000) (50,000)
Chargeable gain 100,000