It was noted that a “A taxpayer who owns two undivided one-half interests in property, received at different times, and disposes an undivided one-half interest, is deemed to have disposed of 50% of each of the halves he owned.” The Tribunal thinks that this is good law. The Tribunal notes that there were pre –existing or original interests/holdings and those acquired from Heritage. In order to ensure a fair and equitable allocation of interests sold, the Tribunal will deem that equal proportions were sold from each holding. The Tribunal also notes that Tullow did not sell 100% of its total interests. It only sold 66.67% of its interests. Therefore 33.33% was sold from each holding In its computation, the respondent used the illustration below to calculate the gain of the applicants using the FIFO method. Table 1: Computation of the gain by the respondent
| Block | % sold | Interest | Total Consideration | COST BASE | Gain | Tax at 30% | ||||
| Signature bonus | Cost base as per S.89G(d) | Incidental expenses S. 52(2) | Total Cost base | |||||||
| TUL | EA1 | 16,67% 50% | Pre-existing From HOGL | $ 258,332,300 $ 775,000,000 | $ 99,999 $ – | $- $ 746,152,777 | $- $ 26,981,481 | $ 99,999 $ 773,134,259 | $ 258,232,300 $ 1,865,740 | $ 78,029,412 |
| EA3A | 16.67 50% | Pre-existing from HOGL | $ 191,665,900 $575,000,000 | $ 66,666 $- | $- $ 553,597,222 | $- $20,018,518 | $ 66,666 $573,615,740 | $ 191,5999,233 $ 1,384,259 | $ 57,895,047 | |
| EA2 | 50% | $ 850,000,000 | $- | $- | $ 850,000,000 | 255,000,000 | ||||
| Sub Total | $ 2,649,998,200 | $ 166,666 | $ 1,299,750,000 | $ 47,000,000 | $ 1,346,916,666 | $ 1,303,081,533 | $ 390,924,460 | |||
| TUOP | EA2 | 16.67% | $ 283,332,200 | S- | $- | $ 283,332,200 | $ 84,999,660 | |||
| TOTAL | 66.66% | $ 2,933,330,400 | $ 166,667 | $ 1,299,750,000 | $ 47,000,000 | $ 1,346,916,667 | $ 1,588,413,734 | $ 475,924,120 | ||
The Tribunal has computed the gain and the tax arising from the transfer of interests in the PSAs of Blocks 1, 2 and 3A, using a similar tabulation as that of the respondent which as set out below:The percentage of interests considered as original/ pre-existing interests and the ones considered as purchased from Heritage was 33.33% each using the averaging method or equitable apportionment instead of the LIFO and FIFO methods. Each was half of the 66.67% interest transferred in EA1 and EA3.
