BIM60115 - Measuring the profits (particular trades): land: trading transactions: acquisition and disposal of superior interest - example
The following example demonstrates the point.
Tenancy acquired 1 January 2010: Cost: Nil.
Freehold acquired, subject to tenancy, 4 December 2011: Cost: £500,000.
Value of tenancy at 4 December 2011: £250,000.
Freehold with vacant possession sold 4 December 2011: £1m.
Capital Gain: There will be a capital gain by virtue of S161 Taxation of Chargeable Gains Act 1992 based on the value of the tenancy at 4 December of £250,000 less the acquisition costs.
Trading Computation
- |
Amount |
Amount |
|---|---|---|
Sale proceeds |
- |
£1,000,000 |
less |
- |
- |
cost of freehold |
£500,000 |
- |
value of tenancy |
£250,000 |
£ 750,000 |
Trading Profit |
- |
£ 250,000 |