Question

Six months ago, Jeanette transferred a piece of real estate to her son, Charles, valued at $125,000. Jeanette purchased the real estate for $90,000 six years ago. All the following statements are true except:

a) Jeanette incurred a capital gain.
b) The transfer is a gift.
c) The current market value is $125,000.
d) Charles owes gift tax on the transfer.

Answer 1

Under the current tax laws in the United States, if Jeanette transferred the real estate to her son Charles as a gift, it may be subject to gift tax.

Step-by-step explanation:

The correct answer is d) Charles owes gift tax on the transfer.

Under the current tax laws in the United States, if Jeanette transferred the real estate to her son Charles as a gift, it may be subject to gift tax. The gift tax is levied on the person making the gift, not the recipient.

However, it's important to note that there are gift tax exemptions and exclusions. As of 2021, the annual gift tax exclusion allows an individual to give up to $15,000 (or $30,000 for married couples) to another individual without incurring any gift tax. In addition, there is a lifetime gift tax exemption which allows individuals to give gifts up to a certain amount without owing gift tax.