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Hello Sir,
If an old asset which cost $500 was sold for $600 and the sales proceeds was used to buy a replacement asset for $200 then what would be the rollover relief?
My question is, in terms of rollover relief, what would happen if the cost of the replacement asset is less than the cost of the disposed asset?
The issue is NOT whether the cost of the new qualifying business asset is less than the cost of the old one – it is whether the cost of the new one is less than the sale proceeds of the old one – clearly that would be the case if the cost of the new asset was lower than the cost of the old one!!
Watch the lecture dealing with partial rollover.
In your example none of the 100 gain can be rolled over as 400 of the proceeds have not been reinvested!
At least 500 of the 600 proceeds would need to be reinvested before any part of the 100 gain would be eligible for rollover. If the new asset had cost 560 then 40 of the proceeds would not have been reinvested therefore 40 of the gain would remain chargeable leaving 60 as the amount to be rolled over
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