ExpertMedium1 markMultiple Choice
CPA · Question 09 · Area I: Individual Compliance and Planning
A taxpayer gifts $100,000 cash to their child in Year 1. The annual gift tax exclusion for Year 1 is $18,000 (stated). The taxpayer is married and elects gift splitting with their spouse. Neither spouse has made prior taxable gifts. What is the amount of the taxable gift for the taxpayer in Year 1?
A taxpayer gifts $100,000 cash to their child in Year 1. The annual gift tax exclusion for Year 1 is $18,000 (stated). The taxpayer is married and elects gift splitting with their spouse. Neither spouse has made prior taxable gifts. What is the amount of the taxable gift for the taxpayer in Year 1?
Answer options:
A.
$82,000
B.
$64,000
C.
$32,000
D.
$0
How to approach this question
Step 1: Split the total gift in half ($50k). Step 2: Subtract the annual exclusion ($18k) from that half. Result is the taxable gift for the donor.
Full Answer
C.$32,000✓ Correct
$32,000
Under IRC §2513, gift splitting allows a gift to be treated as made one-half by each spouse. $100,000 / 2 = $50,000 deemed gift by taxpayer. Less annual exclusion (IRC §2503(b)) of $18,000 = $32,000 taxable gift.
Common mistakes
Subtracting the exclusion from the total before splitting, or forgetting to split the gift amount itself.
Practice the full CPA TCP Practice Exam 2
68 questions · hints · full answers · grading
More questions from this exam
Q01In Year 1, an executive receives an Incentive Stock Option (ISO) to purchase 1,000 shares of stoc...MediumQ02A taxpayer is calculating their Alternative Minimum Tax (AMT) liability for Year 1. They claimed ...MediumQ03On January 1, Year 1, a corporation lends $500,000 to a shareholder at a 0% interest rate. The Ap...HardQ04A U.S. citizen accepts a permanent assignment in France on January 1, Year 1. In Year 1, they ear...MediumQ05A 12-year-old child has $5,000 of interest income and no earned income in Year 1. The standard de...Medium