Taxation - Research Paper Example

Taper Relief:Land: non-business assetQualifying holding periods: 7 whole years Chargeable gains before taper relief 74,286 Chargeable gains after taper relief @75% 55,714.5Explanation In the above scenario, the acquisition date is assumed to be 1 November 1998. This entails that there could be no indexation allowance in this scenario because indexation allowance is deducted on gains obtained from disposal of assets that were acquired before April 1998. Because only three acres of land were sold for 80,000, the cost that is subtracted from the acquisition cost is the one that is deductible, as shown in the calculation.

The retained or unsold part of the land has not been taken as allowable cost. Because the asset was acquired after 5 April 1998, therefore, it is subject to tamper relief. The qualifying holding period from 1 November 1998 to 14 December 2005 appear to be 7 years and 44 days, however it should only consider whole years, which in this case is 7 yeas.The land is assumed to be a non-business asset and thus the tamper relief is applied @ 75% which reduced the chargeable gains by 25%.D):Disposal Proceeds 6,300Less: Costs 1,340Gain before indexation 4,960 Chargeable Gains NilExplanationRacehorse is a wasting chattel and therefore is always exempted from the calculation of capital gains tax.

The gains obtained on a wasting chattel is never included in chargeable gians. No tamper relief has to be calculated because racehorse is already exempted from capital gains tax.E)Because the asset was purchased in May 1971 and held at 31 March 1982, the chargeable gains are to be calculated with the help of 'Rebasing rules':Rebased gain (new. Therefore, the qualifying period will be counted from 6 April 1998. This makes 7 years and 146 days or whole 7 years. It was a non-business asset, therefore the rate for taper relief has been applied at 75%.

In the above scenario, the acquisition date is assumed to be 1 November 1998. This entails that there could be no indexation allowance in this scenario because indexation allowance is deducted on gains obtained from disposal of assets that were acquired before April 1998. Because only three acres of land were sold for 80,000, the cost that is subtracted from the acquisition cost is the one that is deductible, as shown in the calculation. The retained or unsold part of the land has not been taken as allowable cost.

Because the asset was acquired after 5 April 1998, therefore, it is subject to tamper relief. The qualifying holding period from 1 November 1998 to 14 December 2005 appear to be 7 years and 44 days, however it should only consider whole years, which in this case is 7 yeas. *Indexation allowance for rebasing rules is always based higher of allowable costs before 31 March 1982 (i.e. acquisition cost in the above scenario) and the 31 March 1982 market value. Because of the fact that market value at 31 March 1982 is higher than that of the acquisition cost, 6500 has been taken to calculate indexation allowance.

The oil painting was acquired in May 1971, there