Business Tax CBA question

AuntieT Registered Posts: 96 ? ? ?
I've just sat my BTX CBA and a two part question was in that threw me.

Unfortunately can't remember exact wording but...

1) Assets Disposed of on death are not subject to Capital gains / loss treatment

True / False

2) The assets received by Heirs are treated as if cost was the original cost

True / False

I changed my responses so many times as I couldn't get my head around it and can't find any reference to this in my books.

Any ideas????


  • Nikdoug
    Nikdoug Registered Posts: 69 ? ? ?
    I'm not sure but i'm sitting mine tomorrow and have not come across these yet!

    Thanks for posting, i'll be checking it out later.

  • AuntieT
    AuntieT Registered Posts: 96 ? ? ?
    Do let me know if you find out - as i said not sure of wording.

    But it seemed to infer (SP?) that Inheritance Tax takes over!

    No idea!
  • rehana
    rehana Registered Posts: 61 ? ? ?
    osborne book page 8.3

    Two situations where disposals do not give rise to CGT

    1) disposals arising because the owner has died
    2) any disposal between spouses (husband and wife)
  • Nikdoug
    Nikdoug Registered Posts: 69 ? ? ?
    I think:

    1) No CGT but inheritance tax will replace it if above threshold.
    2) Assets inherited are valued at the market value at date of death and therefore not the original cost.
  • AuntieT
    AuntieT Registered Posts: 96 ? ? ?
    Thank you!

    Quite worrying it''s not in my books though!
  • susiewong
    susiewong Registered Posts: 29 ? ? ?
    Hi, I sat my exam yesterday and came across this question, like you I did not know the answer because it wasn't in the Kaplan study books!!!! I'm sure I've failed the exam as struggled to get my head around the overlapping of tax periods on years 2 & 3, but it doesn't help when you are questions that you haven't even learnt!!!

    Oh well only 6 weeks to wait, in the mean time it's starting to look at the dreaded project!!!
  • AuntieT
    AuntieT Registered Posts: 96 ? ? ?
    Good to know i wasn't going mad!
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    When a person dies, their estate is subject to IHT if the total value of the estate is over the threshold. No CGT. The assets in the estate are given a value, called the probate value. If the beneficiary subsequently disposes of the asset, the probate value is treated as the cost of acquisition for CGT purposes. So no, their original cost is probate value and not the original cost that the deceased paid.

    The possible only exception to this is if the deceased had business assets on which they had claimed capital allowances. I believe these would be charged to CGT on the deceaseds final tax return, but this is a guess based on normal disposal of business assets, I don't know if it changes for death.

    Hope that helps and good luck to those still sitting exams.
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