ACCA Advanced Taxation (ATX) Practice Exam

Which exemptions are applicable only to lifetime gifts?

1. Small gifts

2. Normal expenditure out of income

3. Marriage

4. All of the above

The correct answer is: All of the above

The correct answer encompasses all the listed exemptions as they relate specifically to lifetime gifts. Small gifts are exempt from inheritance tax up to a certain limit, allowing individuals to give small amounts to various people each tax year without incurring a tax liability. Similarly, normal expenditure out of income refers to gifts made from a person's income that do not affect their standard of living. These gifts can be made regularly and are exempt from inheritance tax as long as they are made out of surplus income. Marriage gifts, which include gifts made to individuals upon their marriage, also qualify for tax exemptions, where limits apply based on the relationship to the giver. Each of these exemptions applies only to gifts that are given during an individual's lifetime, differentiating them from death-related gifts which may be subject to different tax treatments. This cohesiveness of exemptions underlines their relevance to lifetime giving specifically, reinforcing why the gathered options collectively illustrate exemptions applicable solely to lifetime gifts.