A taxpayer received a gift of $15,000 cash from a friend and inherited $50,000 cash from an aunt in the current year. How much of these amounts must be included in the taxpayer's gross income?

Answer options:

$15,000

$50,000

$65,000

How to approach this question

Apply IRC §102: Gifts and Inheritances are tax-free to the recipient.

Full Answer

A.$0✓ Correct

Under IRC §102, the value of property acquired by gift, bequest, devise, or inheritance is excluded from gross income. (Note: Income earned on the gift AFTER receipt is taxable, but the principal is not).

Common mistakes

Thinking the recipient pays gift tax (the donor does).

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