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Question 3a

Mick Stone disposed of the following assets during the tax year 2013–14:

(1) On 19 May 2013, Mick sold a freehold warehouse for £522,000. The warehouse was purchased on 6 August 2001 for £258,000, and was extended at a cost of £99,000 during April 2003. In January 2007, the floor of the warehouse was damaged by flooding and had to be replaced at a cost of £63,000. The warehouse was sold because it was surplus to the business’s requirements as a result of Mick purchasing a newly built warehouse during 2012. Both warehouses have always been used for business purposes in a wholesale business run by Mick as a sole trader.

(2) On 12 August 2013, Mick sold an acre of land for £81,700. He had originally purchased five acres of land on 19 May 1998 for £167,400. The market value of the unsold four acres of land as at 12 August 2013 was £268,000. The land has never been used for business purposes.

(3) On 24 September 2013, Mick sold 700,000 £1 ordinary shares in Rolling Ltd, an unquoted trading company, for £3,675,000. He had originally purchased 500,000 shares in Rolling Ltd on 2 June 2005 for £960,000. On 1 December 2010, Rolling Ltd made a 3 for 2 bonus issue. Mick has been a director of Rolling Ltd since 1 January 2005.

(4) On 19 January 2014, Mick made a gift of his entire holding of 24,000 £1 ordinary shares in Sugar plc, a quoted investment company, to his son, Keith. On that date the shares were quoted on the Stock Exchange at £6·98–£7·10, with recorded bargains of £6·85, £6·90, £7·00 and £7·05. The shares had been purchased on 8 May 2008 for £76,800. Mick’s shareholding was less than 1% of Sugar plc’s issued share capital, and he has never been an employee or a director of the company.

Required:
(a) Assuming that no reliefs are available, calculate the chargeable gain arising from each of Mick Stone’s asset disposals during the tax year 2013–14.

Note: You are not required to calculate the taxable gains or the amount of tax payable. (9 marks)