Commentary on Sections Overview Overview Section 122: Replacement of part sold begun within 5 years of sale
501.This section sets out the rules that apply if, following the sale of a substantial part of a herd (either all at once or within a year), the farmer begins to replace it within five years. It is based on paragraph 3(8) and (9) of Schedule 5 to ICTA.
502.Subsection (1) sets out the conditions for the section to apply. An explanation of what is meant by “substantial part of the herd” is given in section 113(6).
503.Subsection (2) applies section 116 (replacement of animals in herd). The sale proceeds of the old animal are brought into account as a trade receipt. This is subject to the exception given in section 123 if the sale was for a reason outside the farmer's control.
504.Subsection (3) provides the sale proceeds are not recognised until the new animal is acquired.
505.Subsection (4) deals with the case where not all the animals sold are replaced. No profit or loss arising from the sale is brought into account as a trade receipt.