Leases: merger: example: merger of leases: disposal pre-29/6/92
Mr J acquired a long lease in January 1985 for £30,000. In January 1988 he acquired the freehold reversion for £20,000 and the long lease was extinguished. In January 1991 he sold the freehold for £100,000.
The gain arising is calculated as follows:
|Less||Costs of lease||30,000|
|Cost of freehold||20,000||50,000|
|Note: Indexation runs on all the expenditure from January 1985.|
|less||Indexation 50,000 x .428||21,400|