Part 2Trading income
Chapter 8Trade profits: herd basis rules
The herd basis rules
123Section 122: sale for reasons outside farmer’s control
1
This section applies for the purposes of section 116, as applied by section 122(2).
2
If—
a
the farmer was compelled to sell the part of the herd for reasons wholly outside the farmer’s control, and
b
an animal (“the new animal”) that replaces an animal sold (“the old animal”) is of worse quality than the old animal,
the amount brought into account as a receipt under section 116 must not exceed the equivalent amount for the new animal.
3
If, immediately before it was added to the herd, the new animal was part of the farmer’s trading stock, “the equivalent amount for the new animal” means—
a
in the case of an animal bred by the farmer, the cost of breeding the animal and rearing it to maturity, and
b
in any other case, the sum of the initial cost of acquiring the animal and the cost (if any) incurred by the farmer in rearing the animal to maturity.
4
Otherwise “the equivalent amount for the new animal” means the cost of the new animal.