CGT Share Identification Rules

CGT Share Identification Rules

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I thought I understood the identification rules for shares with the acquisition cost for disposals being the shares acquired on the same day, then the following 30 days, then shares acquired after 5 April 1998 etc.

But what happens when the taxpayer buys and sells shares on the same day after earlier purchases which have already used the base cost of the later purchase?

eg

31.05.06 Buys 10000

01.06.06 Sells 10000

02.06.06 Buys 10000

02.06.06 Sells 9000

The cost of the 01.06.06 sale is any shares acquired in the following 30 days so it is the cost of the 10000 bought 02.06.06. So presumably the cost of the 9000 sold 02.06.06 is 9/10ths of the 10000 bought 31.05.06.

Because not all of the shares are sold, and they are all sold at different prices this gives a different cost for the part of the holding retained than if the cost of the 9000 sold was 9/10ths of the shares bought on the same day.

In other words, do you start applying the identification rules for the earliest lot sold even if that means that you do not identify sales and purchases on the same day because you have already used their base cost against earlier sales.

Hope someone has the faintest idea what I am talking about!

(All shares same company, same type.)

Thanks.
Stephen Gardner

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By AnonymousUser
15th Nov 2007 12:25

share matching
My understanding is that the same day sales will match first with the shares bought on the same day. This leaves 100 shares from 2/6/06 to be matched with the sale on 1/6/06 and the sale balance will match with the purchase on 31/5/06, leaving 100 shares from 31/5/06. All the matching has to be done using the benefit of hindsight ,which doesn't normally cause problems unless the transactions span tax years, when clients may not realise that data from outside the year is needed.

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By User deleted
15th Nov 2007 16:48

Consistency
But surely for the rules to have any consistency one needs to start with the earliest sale and work forward applying the rules to each sale as it occured? I grant you this might give some odd results.

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By AnonymousUser
16th Nov 2007 10:49

Logic?
The whole point of the matching rules was to avoid bed & breakfasting, so those considerations take precedence. The gains can only properly be matched using hindsight in the case of a number of closely dated transactions, but isn't that part of the point of this? If you match in year only using the last held piece of infomation and then don't modify this by taking into account susequent tranactions then you are not applying the matching rules as they are meant to be used. How else can you take account of tranactions that are made up to 30 days later than the one you are looking at?

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