In capital gains tax, which statement is correct regarding disposal costs?

• A. Added to the base cost.
• B. Deducted from the sale price.
• C. Ignored for CGT purposes.
• D. Deducted from gross income.

Answer: (B)

Disposal costs reduce the amount you effectively receive from selling the asset, so they lower the capital gain. In capital gains tax calculations, the gain is typically sale proceeds minus the costs directly related to disposing of the asset (and minus the cost base). Saying disposal costs are deducted from the sale price communicates that reduced net proceeds concept clearly. It’s also true that you could view it as adding those costs to the cost base, which yields the same final gain, but the standard phrasing used in practice and exams is that disposal costs are deducted from the sale price. For example, selling for 180,000 with disposal costs of 3,000 and a cost base of 100,000 gives a gain of 180,000 − 3,000 − 100,000 = 77,000. They’re not ignored, and they aren’t deducted from gross income.