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- June 3, 2022 at 3:38 pm #657262urlittlesisMember
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Hi Sir, thanks alot for answering this question.
Would you please kindly explain the below question? Not really understand how to use 15%/65%/80% in this question.
Q17 part B
(3) On 14 September 2020, Marwa made a gift of 6,500 £1 ordinary shares in Amaranth Ltd, an unquoted investment company, to her daughter.
Before the transfer Marwa owned 8,000 shares out of Amaranth Ltd’s issued share capital of 10,000 £1 ordinary shares. On 14 September 2020, Amaranth Ltd’s shares were worth £3 each for a holding of 15%, £7 each for a holding of 65%, and £8 each for a holding of 80%.
What is the transfer value of the gift of shares to Marwa’s daughter?June 3, 2022 at 9:52 pm #657291kashm93Member
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I’m not a tutor but please delete if my answer is not allowed…interested to know the actual answer though (if i have not answered it correctly below), i have not yet taken the mocks.
This question looks like a diminution in value one where you look at what the position of the donor is as a result of the gift.
So in this case, Marwa owned 8,000 shares which equals to 80% of the ordinary shares. Therefore:
What Marwa did have = 8,000 x £8 = £64,000
Marwa gifted 6,500 which leaves her with 1,500 shares which is 15% of the total holdings. Therefore:
What Marwa now has = 1,500 x £3 = £4,500
Therefore the diminution in value/transfer value of the gift is £59,500 (64,000 – 4,500)June 4, 2022 at 2:34 pm #657355Tax TutorMember
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Kashm93 – you are correct it is the basic concept of a transfer of value – the loss to the estate of the donor.
Urlittlesis – your question would suggest that you have not worked through the lectures and study notes which you MUST do before attempting any exam questions!
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