Question 1

Sarah owned 60% of the shares in a family company, valuing her holding at £600,000. She gifted 15% of the shares to her son. A 45% holding is valued at £350,000, and a 15% holding is valued at £100,000. What is the value of the transfer for IHT purposes?

Accepted Answer

Apply the diminution in value principle: Value of estate before the transfer minus the value of the estate after the transfer.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the market value of the 15% holding (£100,000) instead of the diminution in value.

Sarah owned 60% of the shares in a family company, valuing her holding at £600,000. She gifted 15% of the shares to her son. A 45% holding is valued at £350,000, and a 15% holding is valued at £100,000. What is the value of the transfer for IHT purposes?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 6

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