ACCA Advanced Taxation (ATX) Practice Exam

Which of the following family members is NOT considered a connected person for tax purposes?

1. Aunt

2. Sister

3. Parent

4. Cousin

The correct answer is: Cousin

In tax law, the concept of "connected persons" is significant as it often affects the application of various tax reliefs and rules, especially concerning transactions, valuations, and the assessment of liabilities. Connected persons typically include immediate family members and relatives closely connected by blood or marriage. In this context, the immediate family members usually recognized as connected persons include parents, siblings, and sometimes in-laws. A cousin, however, does not fall under this classification due to the more distant nature of that relation compared to immediate family members. Aunt, sister, and parent are all considered connected persons because they embody closer blood or marital relations recognized in tax regulations, impacting how transactions between them might be treated. Cousins, while family, have a less direct line of connection and do not share the same implications concerning tax obligations and benefits. Thus, choosing cousin as the answer highlights an understanding of the specific criteria that define connected persons in the realm of tax legislation.