Two ways to pass an item
In a town the party has two ways to move items between heroes. G) Trade Item moves one item from one hero to another. D) Distribute gathers every item the party carries into one pile and deals them out again, one at a time. The manual says both can sell to the armoury. Of Trade it says: "this option allows an adventurer to give one of his items to someone else in the party, or to sell one of his items to the Armoury", and then how: trade it to adventurer 7.
What Trade really asks
Trade asks "Whose item shall be traded?", then "Trade which item?", then "Who gets the item?". Each question is a box with a list in it and one line lit. You move the light with the cursor keys (or the keys 8 and 2), or by clicking a line, and take the lit line with Return or OK. C or CANCEL backs out. The lists never ask you to type a number.
"Who gets the item?" has one line for each hero in the party and nothing else. Even an elemental travelling with the party is left off. Press 7 and the box stays as it was, with the same hero lit. Every other key is ignored too, apart from the ones that move the light, take the line or cancel. Press Return after the 7 and the item goes to whichever hero was lit.
Behind the box there is nowhere for a sale to go. The trade takes the item out of one pack, puts it at the end of the other, and re-equips both heroes. It never touches the party's gold or the armoury's shelf.
Where the seventh line is
The Amiga game does have a seventh choice, on the Distribute screen. For each item in the pile it asks who gets it, and its list has the six heroes, numbered 1 to 6, and under them a seventh line: Sell. Click it, or press S, and the item goes to the town's armoury for three quarters of the town's price, paid into the party's gold. It is the only way to sell anything in the game, and it is where the treasure found on the road is offered as you arrive in a town.
The pictures at the top of this page show the two lists side by side, in Pendragon, with my own party. On the left, Trade's "Who gets the item?" just after I pressed 7. On the right, Distribute, with Sell under the six heroes.
The catch is the price of using it. Distribute works on everything at once. To sell one sword, the party has to pour every item it carries into the pile and deal it all out again, item by item.
In my recreation
My recreation plays Trade and Distribute exactly as the 1987 game does, so pressing 7 at "Who gets the item?" does nothing there either. I checked it against the original code with the same keys. My modern take is different: its Armoury buys items from the hero who is shopping, at the Distribute price.