A taxpayer sells an asset on which capital allowances were previously claimed. The sale proceeds exceed the asset’s tax value but do not exceed its original cost. What is the most likely tax consequence?

Question

A   taxpayer   sells   an   asset   on   which   capital   allowances   were   previously   claimed.   The   sale   proceeds   exceed   the   asset’s   tax   value   but   do   not   exceed   its   original   cost.   What   is   the   most   likely   tax   consequence?

Accepted Answer

A   recoupment   may   arise   because   prior   allowances   were   effectively   overclaimed   relative   to   the   remaining   tax   value.

Answer

The   taxpayer   must   restart   the   allowance   period   on   a   replacement   asset.

Answer

No   tax   effect   arises   until   the   taxpayer   ceases   trading.

Answer

The   excess   is   always   exempt   from   tax   because   it   is   capital   in   nature.

Crowdly

A taxpayer sells an asset on which capital allowances were p...

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