A manufacturer runs into financial difficulties and is unable to pay its supplier for the materials it has used. The debt outstanding is £80,000 and the supplier accepts a freehold property in satisfaction of the debt in June 1990. The market value of the property at the time is agreed to be £70,000.

The manufacturer is treated as disposing of the freehold property for £70,000 and any chargeable gain or loss is computed by reference to that figure.

The supplier subsequently sells the property in September 1992. The sale proceeds are

(A) £65,000 or

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