Takeover, Example 4

If you were given the indexed cost at the date of the takeover at say 20,000, then in the first working in the answer you would have an additional column for indexed cost with a total 20,000 which would be split between the new shares acquired in exactly the same proportions as cost, such that the indexed cost of the preference shares at that date would be 5,000 This would give a share pool for the preference shares at that date showing 10.000 shares with a cost of 2,500 and an indexed cost of 5,000. you would the re-index the indexed cost figure at the date those shares were eventually sold and the indexation allowance would then be the difference as ever between the cost figure of 2,500 and whatever your re-indexed cost figure has now become