Question 1

Section B: Case 3 - SteelForge Partners

Scenario: SteelForge Partners is a partnership manufacturing specialized alloys. On 1 May 2023, the partnership sold its old factory for £800,000, realizing a chargeable gain of £150,000. On 1 October 2023, they purchased a new factory for £700,000.

Question: One of the partners, Liam, gifted his 20% share in the partnership to his daughter, Chloe, on 1 December 2023. The market value of the share was £200,000 and Liam's original cost was £50,000. They jointly elect for Gift Hold-Over Relief. What is Chloe's base cost for the partnership share?

Accepted Answer

Calculate the notional gain on the gift (Market Value - Original Cost). Since a joint election for Gift Hold-Over Relief is made, this entire gain is deferred. The donee's base cost is the Market Value minus the held-over gain.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Thinking the base cost is the amount of the gain (£150,000) or the market value (£200,000).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 5

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