CG17516 - Indexation: example: capital allowances exceed value on 31/3/82
F Ltd purchased a ship in 1975 for 拢2,000,000.
The market value on 31 March 1982 was 拢1,000,000.
It was sold in March 1993 for 拢500,000.
The net capital allowances were 拢1,500.000.
In this case the capital allowances exceed the market value on 31 March 1982. However the market value can only be reduced or eliminated. It cannot become negative expenditure.
| - | - | - | 拢 |
|---|---|---|---|
| - | Disposal proceeds | - | 500,000 |
| Less | Market value 31.3.82 | 1,000,000 | - |
| - | Deduct capital allowances (restricted) | 1,000,000 | NIL |
| - | Unindexed gain | - | 500,000 |
| Less | Indexation | - | - |
| - | Cost | 2,000,000 | - |
| - | Capital allowances | 1,500,000 | - |
| - | - | 0.753 x 500,000 | 376,500 |
| - | INDEXED GAIN | - | 123,500 |
As TCGA92/S41 cannot give rise to a gain, but only eliminate a loss, the loss is nil, and there is no gain.