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Your client, Eric, requires advice on the capital gains tax implications arising from the receipt of insurance proceeds and the disposal of some shares.

– Is UK resident and domiciled.
– Is a higher rate taxpayer.
– Is in ill health and is expected to die within the next few months.

Capital transactions in the tax year 2014/15:
– Eric made no disposals for capital gains tax purposes in the tax year 2014/15 other than those detailed below.
– Eric received insurance proceeds of £10,000 following damage to a valuable painting.
– Eric sold half of his shareholding in Malaga plc for £11·50 per share.

Damaged painting:
– Eric purchased the painting for £46,000 in July 2012.
– The painting was damaged in October 2014 such that immediately afterwards its value fell to £38,000.
– The insurance proceeds of £10,000 were received by Eric on 1 December 2014.
– Eric has not had the painting repaired.

(a) Calculate Eric’s total after-tax proceeds in respect of the two capital gains tax disposals in the tax year 2014/15. (6 marks)

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