(1)(a) In this section, "trading stock" means, subject to paragraph (b), property of any description, whether real or personal, which is either-

(i) property such as is sold in the ordinary course of the trade in relation to which the expression is used or would be so sold if it were mature or if its manufacture, preparation or construction were complete, or

(ii) materials such as are used in the manufacture, preparation or construction of property such as is sold in the ordinary course of that trade.

[(b) For the purposes of this section-

(i) "trading stock", in relation to a trade, includes any services, article or material which, if the trade were a profession, would be treated as work in progress of the profession for the purposes of section 90, and references to the sale or transfer of trading stock shall be construed accordingly;

(ii) two persons are connected with each other if-

(I) they are connected with each other within the meaning of section 10;

(II) one of them is a partnership and the other has a right to a share in the partnership;

(III) one of them is a body corporate and the other has control over that body;

(IV) both of them are partnerships and some other person has a right to a share in each of them; or

(V) both of them are bodies corporate or one of them is a partnership and the other is a body corporate and, in either case, some other person has control over both of them;

and in this subparagraph the references to a right to a share in a partnership are references to a share of the assets or income of the partnership and control has the meaning given by section 11.]¹

(c) References in this section to a trade having been discontinued or to the discontinuance of a trade shall be construed as not referring to or including any case where such trade was carried on by a single individual and is discontinued by reason of such individual's death (whether such trade is or is not continued by another person after such death), but shall be construed as referring to and including every other case where a trade has been discontinued or is, by virtue of any of the provisions of the Tax Acts, treated as having been discontinued for the purpose of computing tax.

(2) In computing the profits or gains of a trade which has been discontinued, any trading stock belonging to the trade at the discontinuance of the trade shall be valued in accordance with the following provisions:

(a) in the case of any such trading stock-

(i) which is sold, or is transferred for valuable consideration, to a person who carries on or intends to carry on a trade in the State, and

(ii) the cost of which to such person on such sale or transfer may be deducted by such person as an expense in computing for any purpose of the Tax Acts the profits or gains of the trade carried on or intended to be carried on by such person,

the value of such trading stock shall be taken to be [the amount determined in accordance with subsections (3) and (4)]¹;

(b) in the case of any other such trading stock, the value of such other trading stock shall be taken to be the amount which it would have realised if it had been sold in the open market at the discontinuance of the trade.

(3) Subject to subsection (4), paragraph 2(2) of Schedule 16 and paragraph 4(2) of Schedule 17, the value of any trading stock falling to be valued under subsection (2)(a) shall be taken-

(a) except where the person to whom it is sold or transferred is connected with the person who makes the sale or transfer, to be the amount (in this subsection and subsection (4) referred to as "the price actually received for it") realised on the sale or, as the case may be, which is in fact the value of the consideration given for the transfer, and

(b) if those persons are connected with each other, to be what would have been the price actually received for it had the sale or transfer been a transaction between independent persons dealing at arm's length.

(4) If-

(a) trading stock is sold or transferred to a person in circumstances where subsection (3)(b) would, apart from this subsection, apply for determining the value of stock so sold or transferred,

(b) the amount which would be taken in accordance with subsection (3)(b) to be the value of the stock sold or transferred to that person is more than the acquisition value of that stock and also more than the price actually received for it, and

(c) the person by whom the stock is sold or transferred includes in a return required to be delivered under section 951 for the chargeable period in which the trade is discontinued an election signed by both parties to the sale or transfer that this subsection shall apply,

then the stock so sold or transferred shall be taken to have a value equal to whichever is the greater (taking all the stock so sold or transferred together) of its acquisition value and the price actually received for it or, in a case where they are the same, to either of them.

(5) In subsection (4) "acquisition value", in relation to any trading stock, means the amount which, in computing for any tax purposes the profits or gains of the discontinued trade, would have been deductible as representing the purchase price of that stock if-

(a) the stock had, immediately before the discontinuance, been sold in the course of the trade for a price equal to whatever would be its value in accordance with subsection (3)(b), and

(b) the period for which those profits or gains were to be computed began immediately before the sale.

(6) Where any trading stock falls to be valued under subsection (2)(a), the amount determined in accordance with subsections (3) and (4) to be the amount to be brought into account as the value of that stock in computing profits or gains of the discontinued trade shall also be taken, for the purpose of making any deduction in computing the profits or gains of any trade carried on by the purchaser, to be the cost of that stock to the purchaser.