Assume that Bernie has made no prior gifts. He makes an inter vivos gift in 2020 of $100,000 to Michael. What is the most correct statement about the gift taxation of that gift? Bernie must pay a gift tax of $40,000. Bernie must pay a gift tax of $34,000. Michael must pay an inheritance tax of $34,000 for the right to receive the $100,000. Bernie will pay no tax because the unified credit exceeds the $40,000 tax payable. Bernie will pay no tax because the unified credit exceeds the $34,000 tax payable.

Answered: akes an inter vivos gift in 2020 of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume that Bernie has made no prior gifts. He makes an inter vivos gift in 2020 of $100,000 to Michael. What is the most correct statement about the gift taxation of that gift?

		Bernie must pay a gift tax of $40,000.
		Bernie must pay a gift tax of $34,000.
		Michael must pay an inheritance tax of $34,000 for the right to receive the $100,000.
		Bernie will pay no tax because the unified credit exceeds the $40,000 tax payable.
		Bernie will pay no tax because the unified credit exceeds the $34,000 tax payable.

Expert Solution

Introduction

If an individual's total value of money received during a fiscal year exceeds Rs 50,000, the full amount received will be taxed as 'income from other sources' forthat individual. The gift will thereafter be taxed at the appropriate tax rates.

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