Question

During the current year, Mr. Jones made gifts to his son of the following items: A minivan with an adjusted basis of $13,000 and fair market value of $15,000. Bonds with an adjusted basis of $6,000 and fair market value of $18,000. Antique furniture with an adjusted basis of $12,000 and a fair market value of $35,000. An interest-free $10,000 loan on January 1, to buy a boat for his personal pleasure. His son repaid the loan in full on December 31. The applicable federal interest rate was 10%. Mr. and Mrs. Jones elect gift-splitting. What is the total amount of their taxable gifts to their son in the current year

Answer 1

$38,000

Step-by-step explanation:

Since the Jones elected gift splitting, each spouse will may give $15,000 worth of gifts to their son without paying taxes:

the total value of the gifts (must use fair market value) = $15,000 (minivan) + $18,000 (bonds) + $35,000 (furniture) = $68,000

taxable amount = $68,000 - $30,000 (combined tax free gifts) = $38,000