Question

The Unified Gift and Inheritance Tax:

a) is levied on the recipient of a gift or inheritance.
b) is based on the market value of the gift or inheritance
c) is added to the recipient's adjusted tax basis.all the above are true. e
c) all the above are true.

Answer 1

The Unified Gift and Inheritance Tax is generally paid by the giver, not the recipient, is based on the gift or inheritance's market value, and in 2022, the estate tax applied to estates over $12.06 million.

Step-by-step explanation:

The Unified Gift and Inheritance Tax can seem complex, but we can clarify it by breaking it down. Option a suggests that the tax is levied on the recipient of a gift or inheritance, which is generally not the case for the gift tax; instead, the person who gives the gift is typically responsible for paying the tax. For the b part, the tax is indeed based on the market value of the gift or inheritance. However, for part c, it's the donor's adjusted tax basis that is relevant when they give a gift, not the recipient's. Therefore, the correct answer to the student's question would be 'b) is based on the market value of the gift or inheritance.' It is important to note that in the United States, in 2022, the estate tax only applied to estates worth more than $12.06 million, affecting a small portion of very wealthy individuals.