IHT

Question 1

Standard valuation rules for lifetime gifts and the death estate

Answer 1

Transfer of value is normally at Open Market Value (OMV)

Question 2

The value of quoted shares and securities for IHT purposes is computed as follows:

Answer 2

LOWER OF:

1. Quarter-Up Method
   Use range of prices on stock exchange on the day)

Lower Price + 1/4(Higher Price - Lower Price)

2. Average of the highest and lowest Price

Question 3

ALWAYS assume shares and securities are quoted ‘cum dividend’ and ‘cum interest’

Answer 3

if the shares are sold, they are sold ‘with the right to the next dividend payment’ the shareholder buying the shares will therefore receive the next dividend payment.

if the shares are sold, they are sold ‘with the right to the next dividend payment’ the shareholder buying the shares will therefore receive the next dividend payment.

Question 4

Ex Dividend Date

Answer 4

Ex-Dividend Date: This is the most critical date. It is usually set one business day before the record date. If you purchase the stock on or after the ex-dividend date, you will not receive the next dividend. To be eligible for the dividend, you need to buy the stock before the ex-dividend date.

Record Date: This is the date set by the company to determine which shareholders are eligible to receive the dividend. Only those who are listed as shareholders in the company’s records on this date will receive the dividend.

Dividend Payment Date: This is the date when the dividend is actually paid out to the shareholders.

Question 5

When are shares quoted ex-dividend?

Answer 5

From the ex-dividend date onwards, the shares are quoted as ex-dividend, meaning anyone buying the shares will not be entitled to receive the upcoming dividend. The stock price typically drops by the amount of the dividend on this day to reflect the fact that new shareholders won’t receive the dividend.

Question 6

If an individual dies when shares and security are quoted ‘ex-dividend’ -

Answer 6

The estate will be entitled to the next dividend or interest payment.

Interest is received net of the basic rate tax (20%)

Question 7

The capital value of shares and securities quoted ex-dividend or ex-interest is calculated as follows:

Answer 7

Value using lower of rule
+
NEXT Dividend Payment (as received)
+
Next Interest Payment (LESS 20% TAX)

Question 8

Quoted Shares and Security includes

Answer 8

Investment Trusts
Open ended Investment Companies
Gilt-edged securities
Venture Capital Trusts
Real Estate Investment Trusts

Question 9

Know differences in valuation methods for IHT and CGT