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CIMAPRA19-F01-1 Exam - Topic 6 Question 99 Discussion

RS purchased an asset on 1 May 20X1 for $200,000, exclusive of import duties of $25,000.The asset was sold on 1 December 20X3 for $450,000, incurring costs to sell of $15,000.RS is resident in Country Y where indexation is allowable from the date of purchase to the date of sale.The indexation factor increased by 40% in the period 1 May 20X1 to 1 December 20X3.Capital gains are taxed at 25%.What is the capital tax due from RS on disposal of the asset?
C) $30,000
A) $120,000
B) $38,750
D) $28,500

CIMAPRA19-F01-1 Exam - Topic 6 Question 99 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam
Question #: 99
Topic #: 6
[All CIMAPRA19-F01-1 Questions]

RS purchased an asset on 1 May 20X1 for $200,000, exclusive of import duties of $25,000.

The asset was sold on 1 December 20X3 for $450,000, incurring costs to sell of $15,000.

RS is resident in Country Y where indexation is allowable from the date of purchase to the date of sale.

The indexation factor increased by 40% in the period 1 May 20X1 to 1 December 20X3.

Capital gains are taxed at 25%.

What is the capital tax due from RS on disposal of the asset?

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Suggested Answer: C

by Jettie at Sep 13, 2024, 05:48 AM

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Stefania
9 months ago
Totally agree, the indexation makes a big difference!
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Princess
10 months ago
Wait, how does the indexation factor really affect the gain?
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Alise
10 months ago
I think the capital gains tax will be significant here.
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Hoa
10 months ago
Don't forget the selling costs of $15,000!
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Ahmed
10 months ago
The purchase price was $200,000 plus $25,000 import duties.
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Jarvis
10 months ago
I feel like I’ve seen a question like this before, but I can’t remember the exact steps. I think we need to subtract the selling costs from the sale price before calculating the gain.
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Beckie
11 months ago
If I recall correctly, the capital gain is the selling price minus the adjusted cost basis, and then we apply the 25% tax rate. I just hope I got the numbers right!
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Crista
11 months ago
I think we need to calculate the adjusted cost basis first by applying the 40% indexation to the purchase price, but I’m a bit confused about the selling costs.
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Whitney
11 months ago
I remember we practiced a similar question about calculating capital gains, but I’m not sure how to apply the indexation factor here.
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Sharika
11 months ago
Wait, what's the indexation factor again? I remember learning about it, but I'm a bit fuzzy on the details. I better re-read that part of the question to make sure I understand how it's used in the calculation.
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Carin
11 months ago
Hmm, this looks tricky. I'm not sure I fully understand the concept of indexation and how it applies here. I'll need to read through the question carefully and try to break it down step-by-step.
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Jacki
11 months ago
Okay, let's see. I think I need to calculate the capital gain first, then apply the indexation factor and the tax rate. Shouldn't be too difficult if I can remember the steps.
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Mertie
11 months ago
Alright, I've got this. First, I'll calculate the capital gain by subtracting the purchase price and costs from the sale price. Then I'll apply the indexation factor to adjust the purchase price. Finally, I'll multiply the adjusted capital gain by the tax rate. Easy peasy!
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Abel
2 years ago
Wait, did they mention if the asset was a unicorn? If so, I'm going with the answer that involves the most magical tax deductions.
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Cecilia
2 years ago
User 3: I think the answer is B) $38,750. Let's do the math to confirm.
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Freeman
2 years ago
I agree. Let's calculate the capital tax based on the provided details.
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Emmett
2 years ago
The asset was not mentioned as a unicorn, so we should stick to the given information.
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Francine
2 years ago
Whoa, hold up! Did you guys factor in the cost to sell the asset? That might throw a wrench in the works. Time to sharpen my pencil!
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Iluminada
2 years ago
I'm gonna have to go with D) $28,500. Anything to avoid paying that hefty capital gains tax, am I right?
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Latricia
2 years ago
I'm not sure, but I think D) $28,500 might be the correct answer. What do you think?
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Elza
2 years ago
I agree with you, B) $38,750 does seem like a good choice.
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Afton
2 years ago
I think I'll go with B) $38,750. It seems like the most reasonable option.
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Sherell
2 years ago
This seems straightforward. I'm going with C) $30,000. Gotta love those pesky import duties!
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Silvana
2 years ago
Looks like we're all in agreement then, C) $30,000 it is.
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Apolonia
2 years ago
Definitely, it's important to consider all the factors when calculating capital gains tax.
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Jerilyn
2 years ago
Yeah, the indexation factor and capital gains tax make it pretty clear.
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Candra
2 years ago
I think you're right, C) $30,000 sounds about right.
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Nieves
2 years ago
Hmm, I'm not sure about this one. The indexation factor increased by 40%, so that might impact the calculations.
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Elvis
2 years ago
Finally, we can apply the 25% tax rate to the capital gain to find the tax due.
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Beckie
2 years ago
After that, we can subtract the indexed cost from the selling price to get the capital gain.
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Yen
2 years ago
Yes, we should apply the 40% increase to the original cost.
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Lea
2 years ago
I think we need to calculate the indexed cost of the asset first.
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Keneth
2 years ago
I also believe the answer is B) $38,750, as the costs to sell should be deducted from the selling price before applying the indexation factor and tax rate.
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Bobbie
2 years ago
I agree with Trina, because the indexation factor increased by 40% which will reduce the capital gains and the tax due.
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Truman
2 years ago
I think the correct answer is B) $38,750. The question provides the necessary information to calculate the capital gains tax due.
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Mohammad
2 years ago
B) $38,750
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Oretha
2 years ago
A) $120,000
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Trina
2 years ago
I think the answer is B) $38,750.
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