Question

As the first gift from their​ estate, Lily and Tom Phillips plan to give $21,810 to their​ son, Raoul, for a down payment on a house. a. How much gift tax will be owed by Lily and​ Tom? b. How much income tax will be owed by​ Raoul? c. List three advantages of making this gift.

Answer 1

Answer A: There will be no tax as they both can combine transfer amount up to 30000 as a gift in an year with out any tax, can claim exemption

Answer B : Inheritance is not subject to income tax. Hence no income tax will be required to be paid by Raoul

Answer C: 3 Advantages are

1. Parents by gifting this amount able to transfer the amount with out any taxes, saves income tax for both of them

2. Due to Down payment, Raoul may have to pay lower interest on his Mortgage

3.No Gift tax as well as it is covered in Exemption limits