Question

In prior (pre-2011) years, Lyle had made taxable gifts (i.e., any annual exclusion(s) have been subtracted) totaling $2,000,000, all of which were made to grandchildren. Accordingly, $2,000,000 of Lyle's GST exemption had been allocated to these gifts. During the current year (2017), another $4,060,000 of taxable gifts (i.e., annual exclusion(s) have already been subtracted) were made to Lyle's grandchildren. Lyle did not allocate any of his remaining GST exemption to the current year gifts, because, by 2016 (the year before), all of his children had died. Determine the GST due, if any, on Lyle's gifts in the current year.

a.

None of the other answers is correct. See my submission in Supporting Documents for my answer and/or computations.

b.

$228,000

c.

$400,000

d.

$0

e.

$1,600,000

Answer 1

The advisability of engaging in careful estate planning to minimize the need to pay these hefty transfer taxes, which are imposed at a 40 percent rate to the extent an individual's cumulative taxable wealth transfers exceed the $5.25 million exemption. There is another burdensome transfer tax to be concerned about at the federal level — the generation-skipping transfer (GST) tax, which is imposed at the same rate as the other transfer taxes, in addition to those taxes. The GST tax applies to transfers of wealth, either directly or via trust, to a "skip person" (i.e., a beneficiary in a generation more than one generation below that of the transferor, such as a grandchild, or more remote descendant). The simplest example of a transfer subject to GST tax is when a grandparent leaves a bequest to his or her grandchild, which bypasses or "skips" a living child. Fortunately, just as is the case with the federal gift and estate taxes, there is a $5.25 million exemption available for the GST tax. Thus, only GST taxable transfers above that amount (on a cumulative basis for each taxpayer/donor) would be taxed at the 40 percent rate.

Therefore here in this case Lyle has made gift to Grand Children amounting to 4060000 Which is lesser than the exemption limit given under Act i.e 5.25 million So it need not pay any Generation skipped transfer (GST) to be paid. Therfeore the answer is 0 'd'