CG76791 - Wasting assets: computation: example 1 using T(1)/L
TCGA92/S46
Mr S purchases from a descendant the copyright over the memoirs of a writer 20 years after the end of the year in which the writer died. That copyright is, therefore, a wasting asset since it now has a predictable life of fifty years, see CG76723. He pays the descendant £90,000 for it but does not expect it to have any residual value in fifty years time.
He later sells after twenty years for £80,000.
Subject to any incidental expenses, his Capital Gains computation will be:
£ | ||||||||||
| Disposal Proceeds | 80,000 | |||||||||
| Less | Acquisition cost [E(1)] | 90,000 | ||||||||
| T(1) | = | 20 | = | 2 | ||||||
| L | 50 | 5 | ||||||||
| [E(1)-S] | = | [90,000-0] | = | 90,000 | ||||||
| T(1) | x | [E(1)-S] | = | 2 | x | 90,000 | = | 36,000 | 54,000 | |
| L | 5 | |||||||||
| Gain | 26,000 |
NOTE. Companies and other concerns within the charge to Corporation Tax may be able to claim indexation allowance see CG17200+.