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.
|cost of freehold||£500,000|
|value of tenancy||£250,000||£ 750,000|
|Trading Profit||£ 250,000|