That's very nice of you

Question

1. It's very nice of you to help me.

2. That's very nice of you to help me.

I know the first sentence is correct. But how about the second sentence?

Answer 1

The second doesn't quite work. Either of these is good:

It's very nice of you to help me.

That's very nice of you.

That in the second sentence refers to "(you) helping me" - so it's redundant to include "to help me".

It in the first sentence is a dummy pronoun - it does not refer to any agent. So it's ok to be explicit about the thing that's very nice of you to do in this case.

Answer 2

The second sentence is at best awkward. One might well say just:

That's very nice of you.

leaving what was nice to the context, the previous discussion or action.