ACCA Advanced Taxation (ATX) Practice Exam

True or False: The donor is primarily responsible for paying any lifetime tax due.

1. True

2. False

3. Only if the recipient is underage

4. Depends on the value of the gift

The correct answer is: True

The statement is true because, in the context of lifetime gifts, the donor of the asset is typically the one responsible for any tax implications that arise from the transfer. In many tax jurisdictions, when a gift is made, the donor is liable for any gift tax that may be due based on the value of the gift at the time of transfer. This responsibility is consistent irrespective of the recipient's age or the value of the gift, making it a straightforward obligation for the donor. In some jurisdictions, the rules concerning the taxation of gifts can vary, yet the fundamental principle of the donor being liable for related taxes remains consistent. This is particularly important because it aligns with policy designed to ensure that donors consider the tax consequences of their gifting, thereby affecting their financial planning and gift-giving strategies. Hence, affirming that the donor holds the primary responsibility for any lifetime tax due is indeed accurate.