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HMRC internal manual

# Loss on sale of land: purchases: example of how to adjust the sale price

Julian is the life tenant of a settlement comprising Blackacre, Whiteacre and Greenacre plus various other investments.

After Julian’s death the trustees carry out the following actions

• They grant a depreciatory lease of Blackacre. H(had this been in place at the death the value would have been reduced to £36,000.
• They demolish the porch at Whiteacre. Without the porch the value at the death would have been reduced to £49,000.
• They exchange Greenacre for listed securities at a time when its value is £22,000
• They purchase Blueacre for £17,200.

Example

 Blackacre (£) Whiteacre (£) Total (£) Value on death (IHTM33100) [D]40,000 [D]50,000 Sale price (IHTM33072) 30,000 51,000 IHTA84/S193 adjustments for changes in the interest or underlying land (IHTM33121) + 4,000 + 1,000 Aggregate sale price after adjustments 34,000 52,000 [B]86,000 IHTA84/S196 adjustments (Note 1) arising from exchange (IHTM33150) of Greenacre + 1,500 + 500 Sale price after adjustments [S]35,500 [S]52,500 IHTA84/S192 adjustment (Note 2) for purchase (IHTM33161) of Blueacre + 900 - 500 Fully adjusted ‘sale value’ (IHTM33073) 36,400 52,000

## Note 1

Greenacre:

• Value on death = £20,000
• Value at exchange = £22,000
• Excess = £2,000

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### Blackacre

(£2,000 ÷ £8,000) × (£40,000 - £34,000) = £1,500

### Whiteacre

(£2,000 ÷ £8,000) × (£52,000 - £50,000) = £500

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## Note 2

Purchase of Blueacre £17,200 [A]

Using the formula at IHTM33162 of (A ÷ B) × (D - S), the adjustments are

• £17,200 ÷ £86,000 × (£40,000 - £35,500) = £900 (to be added to the sale price of Blackacre), and
• £17,200 ÷ £86,000 × (£50,000 - £52,500) = £500 (to be deducted from the sale price of Whiteacre).