ACCA Taxation (F6) Practice Exam

Determining the base cost for a donee receiving a gift is crucial for several reasons, particularly concerning potential capital gains tax when the donee eventually disposes of the asset. When a gift is made, the base cost for the donee is important because it affects the calculation of any gains or losses upon the future sale of the asset.

The base cost is often influenced by any deferred gain, meaning that if the asset had appreciated in value before it was gifted, the donee may inherit that appreciation as part of their calculation of any eventual gain. This deferred gain is pivotal to ensuring that the tax implications reflect the true economic benefit received by the donee. Consequently, understanding this deferred nature allows the donee to correctly compute their future tax liabilities based on the original cost of the asset when it was first acquired by the donor, rather than the market value at the time of the gift.

In contrast to other options, immediate tax payment is not typically the donee's responsibility upon receiving a gift, and the base cost is not always zero—it can represent the donor's cost or be affected by any other tax events. Moreover, the market value at the time of gifting can establish the context of the gift but does not solely dictate the base cost for