Where a close company (see ¶779-000) transfers an asset at an undervalue to any person, if it is not a bargain made at arm’s length, the undervalue (i.e. the excess of the asset's market value over the consideration received for the transfer) will be apportioned to holders of its issued share capital. The effect is to reduce the allowable acquisition cost of shares held by the shareholders at the date of the transfer (TCGA 1992, s. 125(1), (2)).

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