Leases

Question 1

What is considered a long lease?

Answer 1

> 50 years

Question 2

What is considered a short lease?

Answer 2

=< 50 years

Question 3

How is the assignment of a long lease treated for capital gains?

Answer 3

As an outright disposal

Question 4

How is the assignment of a short lease treated for capital gains?

Answer 4

The original cost is adjusted using:

Cost x %duration of lease left at disposal / %duration of lease at acquisition

Question 5

How is the property income element of a lease premium calculated? Do you time apportion this?

Answer 5

Premium x (51-n)/50

• yes, time apportion by number of years of lease and length of FY

Question 6

How should the cost be adjusted when the is a grant of a long lease from a long lease or freehold?

Answer 6

cost x A/(A+B)

A - full premium
B - reversionary interest

Question 7

How should the cost be adjusted when the is a grant of a short lease from a long lease or freehold?

Answer 7

cost x a/(A+B)

a - capital element of premium
A - full premium
B - reversionary interest

Question 8

How should the cost be adjusted when the is a grant of a short lease from a short lease?

Answer 8

(%G - %S) / %A

%G - duration of lease at grant of sub lease
%S - duration of lease at termination of sub lease
%A - original duration of lease

Question 9

How do you use the property income element equation when calculating a gain?

Answer 9

Proceeds
Less: cost
Less allowable deduction from trading profits (cost x 51-n/50 x A/B)
Equals subject to wastage

Question 10

How do you calculate wasted cost?

Answer 10

Subject to wastage x %lease when disposed/%lease at start