ACCA Taxation (F6) Practice Exam

In what order are shares matched for individuals?

1. 30 days following sale, same day, shares in pool

2. Same day, shares in pool, 30 days following sale

3. Shares in pool, same day, 30 days following sale

4. Same day, 30 days following sale, shares in pool

The correct answer is: Same day, 30 days following sale, shares in pool

The order in which shares are matched for individuals is crucial for calculating capital gains tax accurately. The correct sequence begins with matching disposals to acquisitions on the same day. This first step reflects the rule that if an individual sells shares that they have also bought on the same day, those transactions are directly matched to determine the gain or loss. Following this, any shares disposed of need to be matched with any shares acquired within the 30 days after the sale. This is known as the "30-day rule." It is intended to prevent individuals from realizing losses on shares they have just sold while simultaneously repurchasing the same shares, which could be seen as an attempt to manipulate tax liability. Finally, any remaining shares are taken from the "pool," which encompasses shares that were acquired before the 30-day period and are not directly matched with the sales. This pooling method averages the cost of shares, thus providing a cohesive basis for calculating gains or losses. Understanding this sequence helps ensure compliance with tax regulations regarding capital gains, and being aware of the matching rules can significantly impact the amount of tax an individual may owe after share disposals.