Cost of improvement rule limits inclusion of pre commencement capital expenditure and defines nil cases for certain assets.

Cost of improvement comprises capital expenditures on additions or alterations to an investment asset incurred by the owner or, when applicable, by a previous owner under special acquisition modes. If acquisition cost is taken as fair market value at the reference date, improvement expenditures incurred before that date are excluded. The cost of improvement is nil for self-generated assets, where improvement cost cannot be determined, and for undertakings transferred in a slump sale.

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