Assume, for this question only, that Kenny and Melissa were married today. They

Question

Assume, for this question only, that Kenny and Melissa were married today. They went straight to Kenny’s lawyer’s office to execute new wills and a QDOT trust document. On the way home from executing a valid will leaving all assets to Melissa, Kenny and Melissa were in a serious car accident. Kenny was comatose for several days before dying. His unpaid medical expenses were $150,000; Melissa had medical expenses for the accident of $10,000. The day after Kenny died, Melissa gave Kenny’s three children and three grandchildren each $22,000 then left for France to stay with her mother. Prior to Kenny's death, Kenny and Melissa gave Kenny's mother $60,000. How much will Kenny report as a taxable gift?

A) $0

B) $16,000

C) $48,000

D) $80,000

Explanation / Answer

Hi,

If any tax payer give gifts in excess of the tax payer's annual gift tax exclusion then that person is required to file Form 709 , United states gift tax return.

The exclusion is $14,000 per year per person, however the life time exemption is 5.45mn.

Although spouses can combine their annual exclusions and give $28,000, but a seperate Form 709 needs to be filed if the amount exceeds the allowed limit.

Gifts made to spouses who are u.s.citizens are exempt.

Cash gifts given during the year = 60000.

Exemption allowed =14000.

Taxable gift=$46000.

As the taxable limit is much below the life time limit the whole amount is free from tax..

Therefore taxable gift is $0.

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