Leases: merger of leases: disposal 29/6/92+: ESC D42
Mr M acquired a lease with forty years to run on 31 March 1975 for £10,000. The marketvalue on 31 March 1982 was £50,000. On 31 March 1987 he acquired the freehold for£60,000. On 1 January 1993 he sold the freehold for £200,000. An election underTCGA92/S35 (5) was made by Mr M.
The gain arising is calculated as follows.
i) Allowable expenditure
Value of lease at 31 March 1982: £50,000
At the date that the freehold was acquired, the lease had 28 years to run, so the cost ofthe lease must be `wasted’, see CG71141-CG71142. The `period of ownership’ begins on 31March 1982, see CG71160.
Amount to be deducted:
£50,000 x 90.284 - 85.053 = £2,894
|Allowable cost of lease:||47,106|
|Add: cost of freehold:||60,000|
|Total allowable expenditure:||107,106|
ii) Computation of gain
|Sale price of property||200,000|
|on cost of lease 47,106 x 0.736||34,670|
|on cost of freehold 60,000 x 0.371||22,260||56,930|