When a person exchanges an unstripped gilt for one or more strips of gilts, the gilt is treated as redeemed at that time for its market value and the acquisition cost of each strip is the proportion of the market value of the gilt which the market value of the strip bears to the market value of all the strips or, as a formula:

For that person, as the new holder of the strips, the strip is treated as redeemed when the corresponding interest payment is made. The profit or loss is found in the normal way by comparing redemption proceeds with acquisition cost as calculated using the above formula.

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