(1). Statement A is true.
Statement B is false.
Gift relief is available where a transfer is immediately subject to IHT (as it is here because the transfer is a chargeable lifetime transfer); there is no need for there to be an IHT liability. For example, gift relief will be available even where a chargeable lifetime transfer is covered by the transferor’s nil rate band.
(i) The rental income will be subject to income tax in the hands of the trustees. It will then be taxed again as part of Gerard’s taxable income and there will be a tax credit for the tax paid by the trustees.
(ii) On Gerard’s death the rental properties will be included in his death estate. The IHT thereon, as a proportion of the total IHT due on Gerard’s death estate, will be paid by the trustees out of the trust’s assets.