ACCA Advanced Taxation (ATX) Practice Exam

Fall in value relief affects which of the following?

1. The death estate

2. The death tax on a lifetime gift

3. The inheritance tax calculation

4. The estate of a deceased person

The correct answer is: The death tax on a lifetime gift

Fall in value relief is a concept related to inheritance tax that applies primarily to lifetime gifts made prior to an individual's death. When a person makes a gift and later passes away, if the value of that gift has decreased in the time between the gift and the death, fall in value relief allows the donor's estate to be assessed using the lower value of the asset at the time of death rather than the higher value at the time the gift was made. This can reduce the overall inheritance tax liability on the gifts made. Choosing the correct answer highlights the connection between lifetime gifts and their valuation for tax purposes. While the death estate, inheritance tax calculation, and the estate of a deceased person may all involve various considerations regarding the assets and tax implications at the time of death, fall in value relief specifically addresses the situation of lifetime gifts and their adjusted valuation due to any decrease in worth prior to the donor's death. This focus on the impact of such gifts on tax calculations distinguishes option B as the most fitting answer to the question.