ACCA Advanced Taxation (ATX) Practice Exam

What is the special rule for valuing quoted shares and securities for inheritance tax purposes?

1. The average of last year's trading price

2. The lower of 'quarter up' method or average highest and lowest price

3. The current market value only

4. The highest recorded price over the last year

The correct answer is: The lower of 'quarter up' method or average highest and lowest price

The special rule for valuing quoted shares and securities for inheritance tax purposes is that the valuation is based on the lower of the 'quarter up' method or the average of the highest and lowest prices on the date of death. This approach ensures that the valuation reflects a fair and reasonable market price at the time of the individual's passing, rather than relying solely on a single price point, which can be volatile. Using the 'quarter up' method allows for a slight increase in valuation based on certain calculations related to price averages. This method recognizes that the market can fluctuate and offers a more balanced approach to pricing, providing protection against potential overvaluation that might occur with just considering the highest price or current market value alone. Valuing shares based solely on current market value can lead to discrepancies, as market conditions may vary significantly from one moment to the next. Relying on the highest recorded price over the last year could result in an inflated estimate, disregarding more moderate valuations that could offer a better reflection of worth at the time of death. Thus, the chosen method ensures that the inheritance tax is calculated on a robust and fair basis, which is crucial for accurate tax assessments.