Carol and Kiaan acquired 100% of the share capital in Echotwo Limited, a UK based trading...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Carol and Kiaan acquired 100% of the share capital in Echotwo Limited, a UK based trading company, in May 2005, with Carol acquiring 60 ordinary shares and Kiaan 40 shares, each at a cost of £5,000 per share. Carol and Kiaan were appointed directors of Echotwo Limited in May 2005. Carol and Kiaan are married and have two adult daughters, Ayesha and Zara. Carol died in November 2019 leaving under the terms of her will 20 shares each to Kiaan, Ayesha and Zara. It was agreed that the probate value of Carol's shares in Echotwo Limited was £8,000 per share. a) Briefly identify and explain any IHT reliefs and exemptions that may have applied to the shares on Carol's death. (4 marks) In May 2021, Zara agreed to buy Ayesha's shares from her for £200,000. This was agreed as the market value by HMRC. Ayesha is a higher rate taxpayer and made no other capital gains during 2021/22. b) Calculate the capital gains tax liability of Ayesha arising on the sale of her shares. (4 marks) c) Describe the conditions that would have needed to have been satisfied for Ayesha to benefit from Business Asset Disposal relief on the sale. (2 marks) d) Briefly explain how Ayesha could use an EIS investment to defer the capital gains tax payable. (2 marks) In January 2022, Kiaan decided to give his 60 shares to Zara. At the time his shareholding was valued at £750,000. Kiaan and Zara agreed to enter into a gift relief election. e) Calculate the held over gain and the capital gains tax base cost of these shares for Zara. (6 marks) f) Explain how IHT Business property relief could be lost if Kiaan dies within 7 years of this gift. (2 marks) Carol and Kiaan acquired 100% of the share capital in Echotwo Limited, a UK based trading company, in May 2005, with Carol acquiring 60 ordinary shares and Kiaan 40 shares, each at a cost of £5,000 per share. Carol and Kiaan were appointed directors of Echotwo Limited in May 2005. Carol and Kiaan are married and have two adult daughters, Ayesha and Zara. Carol died in November 2019 leaving under the terms of her will 20 shares each to Kiaan, Ayesha and Zara. It was agreed that the probate value of Carol's shares in Echotwo Limited was £8,000 per share. a) Briefly identify and explain any IHT reliefs and exemptions that may have applied to the shares on Carol's death. (4 marks) In May 2021, Zara agreed to buy Ayesha's shares from her for £200,000. This was agreed as the market value by HMRC. Ayesha is a higher rate taxpayer and made no other capital gains during 2021/22. b) Calculate the capital gains tax liability of Ayesha arising on the sale of her shares. (4 marks) c) Describe the conditions that would have needed to have been satisfied for Ayesha to benefit from Business Asset Disposal relief on the sale. (2 marks) d) Briefly explain how Ayesha could use an EIS investment to defer the capital gains tax payable. (2 marks) In January 2022, Kiaan decided to give his 60 shares to Zara. At the time his shareholding was valued at £750,000. Kiaan and Zara agreed to enter into a gift relief election. e) Calculate the held over gain and the capital gains tax base cost of these shares for Zara. (6 marks) f) Explain how IHT Business property relief could be lost if Kiaan dies within 7 years of this gift. (2 marks)
Expert Answer:
Answer rating: 100% (QA)
a Inheritance Tax IHT Reliefs and Exemptions on Carols Death Spouse Exemption The transfer of shares from Carol to Kiaan would qualify for the spouse ... View the full answer
Related Book For
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen
Posted Date:
Students also viewed these corporate finance questions
-
How do Windows systems save settings? How about Unix systems? What are the notable differences? Do the differences make them vulnerable to different types of malware? Why or why not?
-
A bakery with a December 31 st year end purchased new equipment on October 31 st 2000 for $10,000. This was their first equipment purchase. Required: What are the tax consequences if the equipment is...
-
The following draft statement of financial positions relate to Largo, a public limited company, Fusion, a public limited company and Spine, a public limited company, as at 30 November 20X3. The...
-
Over the last few years, we have started to see some retailers open earlier and earlier on Thanksgiving Day. Others have taken a different approach and decide to remain closed. Is it a good strategy...
-
Given the income statement below for National Beverage Company for 2013, and the sales forecast from Problem 1, prepare a pro forma income statement for 2014. National Beverage Company Income...
-
Examine the heating curve for water in Section 12.7 (Figure 12.36). Explain why the curve has two segments in which heat is added to the water but the temperature does not rise. Temperature (C) 125...
-
What is the difference between collision and comprehensive physical damage coverages?
-
Presented below is an aging schedule for Halleran Company. At December 31, 2014, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $12,000. Instructions (a) Journalize and post...
-
Chelsea bought a Treasury bond with a coupon rate of j2=2.36% p.a. and face value of $100. The bond will mature on 15 April 2028. If Chelsea purchased the bond on 17 February 2018, what was its...
-
Chumpy Lighting Limited manufactures a wide variety of light bulbs which it sells to lighting shops and builders merchants through wholesale distributors. It also sells direct to the big UK...
-
__ is a common phenomenon in which patients sometimes feel better after receiving treatment even when the treatment is inactive or fake. Question 61Answer a. Blinding b. Randomization c. Confirmation...
-
How can businesses effectively adapt to changing consumer behavior and market trends?
-
What are the key components of a successful product launch strategy, and how can businesses ensure a successful rollout?
-
1. A man, denoted as A and having a mass m, is connected to a block, denoted as B, with a mass of m/2. They are linked by a string passing over a pulley, as illustrated in the figure on the right....
-
How can businesses effectively manage risk in their operations and mitigate potential threats to their success?
-
What are the key considerations for businesses when developing a digital marketing strategy?
-
Fin de slope passing through the points ( - 9 , - 8 ) and ( 7 , - 8 )
-
You are thinking of investing in one of two companies. In one annual report, the auditors opinion states that the financial statements were prepared in accordance with generally accepted accounting...
-
Ejoy, a public limited company, has acquired two subsidiaries. The details of the acquisitions are as follows: The draft statements of comprehensive income for the ended 31 May 2006 are: The...
-
CD is a manufacturing entity that runs a number of operations including a bottling plant that bottles carbonated soft drinks. CD has been developing a new bottling process that will allow the bottles...
-
Using the information given in Activity 10.2 in respect of Bayer's value added statement identify possible conclusions that could be drawn in respect of Bayer's performance for the year and any...
-
Daisy Brands, a U.S. company, sells items abroad. Daisy prices many of these transactions in the currency of the customer. Following are four such transactions made in the last accounting period,...
-
Homestyle Brands imports materials from other countries and exports finished products to customers throughout the world. Information regarding four such transactions occurring in the last accounting...
-
To take advantage of high short-term interest rates, Chipotle Mexican Grill, Inc. purchased a 1,000,000 krona six-month certificate of deposit from a Swedish bank for \($125,000\) on October 1, 2016....
Study smarter with the SolutionInn App