Commentary

B2.475 Trading stock and sources of trading stock

Business tax
Business tax | Commentary

B2.475 Trading stock and sources of trading stock

Business tax | Commentary

B2.475 Trading stock and sources of trading stock

In order to determine whether a deduction is available for the acquisition of stock, a distinction must be made between fixed capital assets, the cost of which is not deductible in arriving at trading profits, and revenue trading assets, the cost of which is deductible. The distinction between these two categories is considered in B2.203, B2.602–B2.609. In the case of trading stock, the amount to be deducted is the price paid for the stock, in the absence of any adjustment that may be required under transfer pricing provisions1. On the purchase of a business, the price paid may include actual or contingent liabilities assumed on that purchase2.

It is necessary to distinguish between expenditure on the acquisition of trading stock itself and expenditure on the acquisition of a contractual or similar right entitling a person to obtain trading stock. In

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