Page 133 - P6 Slide - Taxation - Lecture Day 1

Debtor (par 12A)

• Where the reduction amount is applied to a pre valuation asset
the following steps should be followed:

1.Determine the market value of the pre valuation date asset
immediately before the time the debt is reduced.

2.Calculate a notional capital gain\loss if the asset is disposed of for
that market value at that time making use of the normal paragraph

26 or 27 rules when calculating this gain or loss.

3.Treat the asset as having been reacquired immediately before the

debt is reduced for the market value referred to in 1. above less the
capital gain in 2. or plus the loss in 2.

4.Now make use of paragraph 12A(3) to apply to reduction amount
to reduce the base cost.

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