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Readers' Forum
Replies to Queries – 2
Abandoned option
I am unclear about the qualifying expenditure on option costs to purchase land intended for use as trading stock. The facts of the case are:
* A (the grantor) granted an option to B (grantee) over a parcel of land, giving B the option to purchase the said land.
* My client (C) paid B £50,000 for the assignment of his rights under the option agreement.
* The option was not exercised.
Readers' Forum
Replies to Queries – 2
Abandoned option
I am unclear about the qualifying expenditure on option costs to purchase land intended for use as trading stock. The facts of the case are:
* A (the grantor) granted an option to B (grantee) over a parcel of land, giving B the option to purchase the said land.
* My client (C) paid B £50,000 for the assignment of his rights under the option agreement.
* The option was not exercised.
Under normal option agreements, the tax position seems to be set out in section 144(4) and (7), Taxation of Chargeable Gains Act 1992 in that 'The abandonment of an option to acquire assets exercisable by a person intending to use them, if acquired, for the purpose of a trade carried on by him, shall constitute the disposal of an asset (namely the option)'.
The abandonment of any other option is not a disposal.
My concerns are these:
(1) To claim capital loss treatment, does this mean that the asset in question, if it is land, must be land to be used for the purpose of the trade, such as a factory or office building? This is different from my client who was intending to acquire land as development stock.
(2) Thus, if it is land intended for use 'in' the trade as opposed to 'for' the trade, does this suggest that the abortive expenditure is a 'nothing'?
(Query T15,777) – Rossi.
