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- June 7, 2016 at 11:29 am #320260
John transferred 300,000 to his son Jake in June 2005
He then transferred 200,000 to his daughter Sarah in June 2011These were his only transfers before his death in June 2015.
NRB for 05/06 is 275,000A) How much NRB is available to him on his death estate?
B) What would be the effect if the 2005 transfer was to a trust and not his son?
C) What is the effect if the 2005 transfer didn`t exist?I prefer showing my tutors that I have attempted a question before asking them it. so below is my attempt.
A) Since the transfer is a PET current NRB is used. Since the transfer was made within 7 years of the second transfer, it will have a direct effect on that.
NRB availabe to Transfer in 2011
325,000-300,000= 25,000NRB available at death= 325,00-25,000 = 300,000
In this case, the limiting of NRB for the second transfer has increased NRB available at death.
B) Only 275,000 NRB is available in 2005.
NRB at transfer in 2011 325,000- 275,000= 50,000
NRB at death 325,000- 50,000= 275,000C)
NRB available on death
325,000-200,000= 125,000Since the max. NRB is available at 2011 it reduces the NRB available at death
Is this correct?
Thanks for the help!June 8, 2016 at 11:37 am #320795Have you listened to the IHT lectures and worked through the IHT notes?
A) the PET in 2005 is ignored as it is more than 7 years before death – therefore the PET in 2011 (200,000) uses the NRB first leaving 125,000 NRB to apply to the estate
B) if the 2015 transfer was a CLT then for purposes of calculating the tax on the 2011 PET it would be deemed to have used 300,000 of the NRB leaving only 25,000 of the NRB available for the PET. By the date of death however the ONLY transfer within the previous 7 years is the 2011 PET of 200,000 so again the NRB available for the death estate is the same 125,000!
C) Same answer as A)
June 8, 2016 at 12:09 pm #320809I haven`t listened to the OT lectures as I studied the subject at a local college. I have been going through the notes though
I have a follow up question on B
why have we used 325,000 as our NRB in 2005 while only 275,000 is available?
Since we have to pay lifetime IHT doesen`t that mean that we use the NRB available at that date?Because if we were asked to calculate the lifetime IHT on the 2005 gift we would use 275,000 as our NRB right? Since that is immediately paid.
June 8, 2016 at 10:06 pm #321216Also for A, Why do we ignore the transfers made before 7 years. If we were to try and find the tax on the PET in 2011 we would use our NRB depending on how much NRB we have left from the 2005 transfer right?
Please answer this soon because the exam is early tomorrow
June 8, 2016 at 10:42 pm #321237Also, what about the Annual exemptions? I feel you have forgotten those
June 9, 2016 at 3:09 am #3212781. When we calculate the IHT as a result of death we use the NRB in force at the date of death – we only use the lifetime rate when calculating the tax payable in lifetime on CLT’s
2) No – if a PET is more than 7 years before death then it has no effect on the IHT computed on death as it is exempt
3) I assumed you gave me the chargeable transfer figures (after AE’s) otherwise in B) you would have to know who had paid the lifetime tax on the 2015 CLT to know what was the gross CLT figure to then use in calculations of the IHT due on the 2011 PET
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