Hi All
See below question, can anyone help me understand why incidental costs of acquisition of 1,500 were not used in calculating the unindexed gain?
Thanks guys
Greenwood Ltd. disposed of an investment property on 31/12/2018.
He received disposal proceeds of £115,000 for the property and incurred legal fees on disposal of £5,000.
He has initially purchased the property for £15,000 and incurred incidental costs on acquisition of £1,500 on 31/12/2008.
He had spent £25,000 to extend the property on 31/12/2010.
Relevant indexation factors are:
On cost 0.306
On enhancement 0.218
What is his capital gain for the tax year 18/19?
SOLUTION
Disposal proceeds £115,000
Incidental costs to dispose (£5,000)
Net sale proceeds £110,000
Acquisition cost (£15,000)
Extension cost (£25,000)
Unindexed gain £70,000
Indexation allowance for acquisition (£5,049) (W1)
Indexation allowance for extension (£5,450) (W2)
Capital gain £59,501