ACCA Advanced Taxation (ATX) Practice Exam

True or False: Dividends declared pre-death but received post-death are still included in the individual's last income computation.

1. True

2. False

3. Only if they were declared in the same tax year

4. They are excluded from the income computation

The correct answer is: True

Dividends that are declared before an individual's death but received afterwards are indeed included in the individual's last income computation. This is based on the principle that income tax is generally calculated on the income earned or received during a specific period, which can include the deceased's final year or period prior to death. The rationale is that the dividends were declared while the individual was still alive, thus representing income earned during their lifetime. The receipt of these dividends after death does not change their classification concerning the individual's income. It's important for tax purposes to recognize that the timing of the declaration rather than the receipt is what governs their inclusion in the last income computation. When considering the other options, it becomes clear that the statement is accurate because dividends declared prior to death are linked to the period when the individual was alive, impacting the income computation for that final tax year. This understanding is crucial in assessing an individual’s tax situation during their estate processing.