Question

Which of the following are added to current taxable gifts to calculate the gift tax?

a) The annual exclusion

b) The lifetime exemption

c) The amount of gift tax paid on prior gifts

d) The amount of gift tax that is due on the current gift

Answer 1

The factors added to current taxable gifts to calculate the gift tax include the annual exclusion, lifetime exemption, amount of gift tax paid on prior gifts, and the amount of gift tax due on the current gift.

Step-by-step explanation:

To calculate the gift tax, several factors are added to the current taxable gifts. These include:

1. The annual exclusion: This is the amount of money that an individual can gift to another person each year without incurring a gift tax. For 2021, the annual exclusion is $15,000 per recipient.
2. The lifetime exemption: This is the total amount of money an individual can give as gifts throughout their lifetime without any gift tax liability. The lifetime exemption for 2021 is $11.7 million per person.
3. The amount of gift tax paid on prior gifts: If an individual has already paid gift tax on past gifts, that amount is taken into account when calculating the gift tax on current gifts.
4. The amount of gift tax that is due on the current gift: This is the gift tax owed on the current gift, calculated based on the value of the gift and the applicable tax rate.