ACCA Advanced Taxation (ATX) Practice Exam

Is there an available exemption for charitable donations concerning both lifetime gifts and death?

1. Yes, there is an exemption

2. No, it is not applicable

3. Only for lifetime gifts

4. Only for estate taxes

The correct answer is: Yes, there is an exemption

There is indeed an available exemption for charitable donations concerning both lifetime gifts and on death. Charitable donations provide a relief mechanism that allows individuals to reduce their taxable income or the value of their estate, benefiting both the donor and the charitable organization. When individuals make charitable contributions during their lifetime, these donations can often be deducted from their taxable income, subject to certain limits and conditions. Additionally, when a donor passes away, any charitable donations bequeathed through their estate may also be exempt from estate taxes, thereby reducing the overall taxable estate. This dual approach to the exemption for charitable donations is designed to encourage philanthropy and support charitable organizations, while also providing tax benefits to individuals making these lifetime gifts or planning their estates. Therefore, the recognition of both lifetime gifts and death in terms of exemptions is a significant aspect of tax legislation aimed at supporting charitable endeavors.