CG76792 - Wasting assets: computation: example 2: using the T(2) formula

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 years바카라 사이트™ time.

After five years, Mr S has to take action to prevent a breach of his copyright. This costs him £10,000 in allowable expenditure on legal fees.

He later sells after twenty years for £80,000.

The computation now becomes:

          £        
  Disposal proceeds         80,000      
LESS Acquisition cost [E(1)]       90,000        
  Reduction as CG76791       36,000        
  Allowable cost         54,000      
  Legal expenses [E(2)]       10,000        
  T(1) - T(2) = 20 - 15 = 5                
  L - [T(1) - T(2)] = 50 - 5 = 45                
                   
  E(2) x T(2) = 10,000 x 15 = 3,333  
  L - [T(1) - T(2)]   45            
          6,667        
  Allowable expenditure         60,667 60,667    
  Gain         19,333      
                   

NOTE. Companies and other concerns within the charge to Corporation Tax may be able to claim indexation allowance, see CG17200+.