CG17484 - Indexation: example: wasting assets/assets derived from other assets

In his will Mr K, who died on 1 February 1983, left the film rights in a novel to his daughter Miss L, and the rest of the copyright to his son Mr M. the respective probate values were £50,000 and £35,000.

1 January 1987 Miss L acquired the rest of the copyright from Mr M for £60,000. This was a transaction between connected persons, and Shares and Assets Valuation, see CG68300, advised that the value was £80,000.

1 January 1992 Miss L sold the (entire) copyright for £200,000. The copyright is a wasting asset as it will cease to exist on 31 December 2033.

Mr M바카라 사이트™s computation is

- - - - £
- - Market value on sale - 80,000
Less - probate value 35,000 -
- - wasted 3/50 2,100 -
- Wasted cost - - 32,900
- - Unindexed gain - 47,100
Less Indexation 32,900 - 6,744
- - INDEXED GAIN - 40,356

For Miss L TCGA92/S43 applies because the value of the copyright in her hands is partly derived from the film rights which she had previously. Once she had the copyright as a whole, the film rights as a separate asset ceased to exist. Her computation is:-

- - - - £
- Disposal proceeds - - 200,000
Less Costs - - -
- Probate value 50,000 - -
- less wasted 8/50 8,000 42,000 -
- Market value 80,000 - -
- less wasted 5/47 8,510 71,490 113,490
- - Unindexed gain - 86,510
Less Indexation 113,490 x 0.356 - 40,402
- - INDEXED GAIN - 46,402

Indexation runs on BOTH items of allowable expenditure from 1 January 1987. (If on the other hand Mr M had paid his sister to surrender her film rights, indexation would have run on the copyright from the date of Mr K바카라 사이트™s death as acquisition costs, and on the market value of the film rights from the date of surrender as enhancement expenditure.)

There are examples demonstrating the case where a leaseholder buys the freehold at CG71420 - CG71423.