Christian transferred $60,000 to an irrevocable trust for the benefit of his three daughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally among them. What is the amount of the taxable gifts, if any, made by Christian?

Question

Quizplus · Accepted Answer

The correct answer is E because the amount of the taxable gifts cannot be determined without valuing each daughter's income interest in the trust. The value of the gift for tax purposes includes both the present value of the income interest that each daughter is entitled to for five years and the value of the remainder interest that they will receive after five years. These values require actuarial calculations to account for the time value of money and the probability factors associated with the duration of the income interests.

Christian Transferred $60,000 to an Irrevocable Trust for the Benefit