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The taxpayer bought a property for £1.4 million in 1990. However it fell substantially in value and on 2 April 1993 the taxpayer agreed to sell the property for £400 000 to R Ltd.
On the same day the taxpayer and R Ltd entered into an option agreement in which R granted the taxpayer the right to repurchase the property.
The taxpayer had made other chargeable gains in that year and hoped to crystallise a loss as a result of the property sale. He claimed the loss in his 1994-95 tax return.
However the sale did not proceed as planned and the contract was extended to December 1994.
By September 1994 the property had regained some of its value and the taxpayer decided to sell it to B Ltd for £600 000.
In order to extricate himself from the agreement with R the parties made...
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