Question

2. 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.

a) Connie transfers her vacation house worth $1 million to a trust. Her college roommate Angelina is allowed to use the house for the next 10 years, and after 10 years title to the house is transferred to Guido, Connie’s uncle. The value of the transfer to Angelina is $25,000.

     i) Is the transfer to Angelina subject to the gift tax?

     ii) If the transfer to Angelina is taxable what is the amount of the gift?

b) Connie puts $100,000 in trust with income payable to her daughter Crystal, and the remainder being paid to Connie’s granddaughter Dina upon Crystal’s death. The trust is revocable at any time by Connie.

Answer 1

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Answer:

2.

a)

i) It is subjected to gift tax. because the consideration amount is under the actual value of $1 million

ii) The taxable amount is $25,000 as the consideration value is limited to $25,000

b)

It is not a taxable gift becasue the trust is revocable at any time by Connie and hence the transfer of $1M in trust with income payable to her daughter and the remainder being paid to her granddaughter