Hello Sir, I hope you're doing good.
Please help me clear my confusion..
When the unused RNRB for instance 150000 (100%) of the first spouse can be transferred to the second spouse who has left main residence to direct descendants worth $188000.
What is the total amount of residence nil
rate band which will be available when calculating the IHT payable on second spouse's
chargeable estate?
The answer given in kaplan kit for this ques#200(2) is 188000 which is:
The available RNRB is the lower of:
? Lebna’s RNRB of £300,000 (W1)
? The value (net of repayment mortgage) of the main residence of £188,000 (W2)
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My doubt is, don't we apply the lower of rule like on second spouse's individual available RNRB compared with his main residence that would give us 150000 as the answer
and then we take 150000*100% for unused transfer
so that we end up with the final answer of 300000.
help me understand the answer given in the kit is it the correct logic?
As another ques from kaplan kit ques#205 (a) (2) has a similar situation but in that ques they're taking the RNRB for second spouse in the tutorial note as $300000 even though the value of main residence is $290000
Sir please help me clear this concept and application of the lower of rule.. Nothing has been mentioned about it in the study texts.. there are only simple transfer questions where we don't compare the unused transfer+own RNRB with the value of main residence to get the lower of.
UNUSED RNRB
The RNRB is by its name specific to ONLY the taxpayer's main residence and only when it is transferred on death to a direct descendant - if therefore the value of the main residence is less than the taxpayer's available RNRB (increased if relevant by the transfer of unused RNRB from a spouse or civil partner) then the RNRB to apply is limited to the value of the main residence.
In your examples above from the information you have supplied - I do not have the Kaplan kit - the first example correctly limits the available RNRB of £300,000 to the property value of £188,000 and in the second example the RNRB must also be limited to the lower value of the property which you have stated is £290,000
Thanks a ton for the clarification sir, I'm assuming the second answer which was basically a tutorial note explanation is incorrect then.
Thank you once again and honestly love all your lectures so detailed and very much easy to understand.
Correct - the RNRB cannot be greater than the net value of the main residence included in the chargeable estate, otherwise it would be reducing the value of assets other than the main residence