Question

In: Accounting

Indicate whether each of the following transfers by Connie constitute a taxable gift, and if so...

Indicate whether each of the following transfers by Connie constitute a taxable gift, and if so give the amount of the gift. Explain your answer. Assume unless stated otherwise that Connie is not married, and in each case, it is the only transfer to that person during the year.

a) $16,000 transferred to Connie’s sister.

b) $25,000 is given to Connie’s alma mater Mont State University

c) $30,000 is paid to the local hospital for medical bills for Connie’s best friend Ben.

d) $20,000 is paid directly to the registrar of Big Sky University for the tuition of Connie’s niece Dierdre.

Expert Solution

Concept:

Gift of Present interest that is transfer of wealth that can be assessed by the receipient immediately is taxable subject to $ 15,000 exemption for single taxpayer.

Other Exclusions relevant for question :

Gifts to spouse are fully exempt.

Payment DIRECTLY TO SCHOOLS for tuition for another is fully exempt ( no requirement like dependent or relative of taxpayer ).

Payment DIRECTLY TO HEALTH CARE providers for another is fully exempt. ( No requirement like dependent or relative of taxpayer ).

Answer.

1.

$ 16,000 transferred to Connie's sister is present interest gift. So, it is taxable in excess of $ 15,000 ( as taxpayer is single ) present gift exemption.

Amount of taxable gift = $ 1,000 ( $ 16,000 - $ 15,000 )

2.

$ 25,000 given to Mont state University as connie's alma mater is present interest gift which taxable in excess of $ 15,000 present gift exemption for single taxpayer.

Amount of taxable gift = $ 10,000 ( $ 25,000 - $ 15,000 )

3.

$ 30,000 paid to local hospital for medical bills for Connie's best friend Ben is fully exempt present interest gift as it is payment made to local hospital for medical reason for the best friend ( refer concept).

Amount of taxable gift = $ 0.

4.

$ 20,000 paid DIRECTLY to the registrar of Big sky University for tution fees of connie's niece is fully exempt present interest gift as payment directly to University for tution fees is fully exempt ( refer concept ).

Amount of taxable gift= $ 0.

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