(1)On the disposal of a deeply discounted security by a transfer of a kind specified in subsection (2), for the purposes of this Chapter an amount equal to the market value at the time of the disposal is treated as payable.
(2)The transfers are—
(a)a transfer made otherwise than by a bargain at arm’s length,
(b)a transfer between connected persons,
(c)a transfer for a consideration which is not wholly in money or money’s worth,
(d)a transfer treated as made by section 437(3) (death), and
(e)a transfer by personal representatives to a legatee.
(3)Subsection (1) is subject to subsection (4).
(4)On a conversion of a deeply discounted security into shares or other securities which counts as its disposal under section 437(1), an amount equal to the market value of the shares or other securities at the time of the conversion is treated as the amount payable.
(5)Subsection (4) is subject to section 445(8) (exchanges for and consolidations of strips).
(6)In this section “legatee” includes any person taking (whether beneficially or as trustee)—
(a)on a testamentary disposition, or
(b)on an intestacy or partial intestacy.
(7)Such a person includes a person taking as a result of an appropriation by personal representatives in or towards the satisfaction of a legacy or other interest or share in the deceased’s property.