In: Accounting
Showing workings, calculate E’s overall net capital gain or loss (consider both the house and the shares but assume she has no other CGT events)
In March 2012 E inherited a house from her friend who had passed away on 1 October 2011. The house had a market value of $500 000 at that time. Steph’s friend had bought the house on 21 September 1984 for $150 000 incurring $500 in legal fees on purchase. E decided she did not want to live in the house so she rented it out until March 2018 when she sold it for $700 000. At the same time, she sold a parcel of shares in bank for $25 000 which she had purchased for $50 000 in June 2016.
Calculation of Capital Gain/Loss | ||||
Long Term Capital Gain on Sale of House | Amount | Amount | ||
Sale proceeds from the sale of house | 7,00,000 | |||
Less: | ||||
Cost of acquisition | 1,50,000.00 | |||
Legal Fees | 500.00 | (1,50,500) | ||
Long Term Capital Gain on Sale of House | 5,49,500 | |||
Long term Loss on sale of Shares | ||||
Sale proceed from the sale of shares | 25,000 | |||
Less: | ||||
Cost of acquisition | -50,000 | |||
Long term Loss on sale of Shares | -25,000 | |||
Total Capital Gain for E | 5,24,500 | |||
Note: | ||||
Due to lack of information about Indexation, the same has not been done. | ||||
If the shares are held for more then one year the Gain or Loss on sale of shares is considered to be Long Term Gain or Loss. | ||||
Cost of accquisition for the house inherited is the cost incuured by deceased |