Identify which of the following statements is false.
A)A power of appointment exists when a person transfers property and grants someone else the power to specify who eventually will receive the property.
B)A person possesses a general power of appointment if the person has the power to appoint property to himself, his creditors, his estate, or the creditors of his estate.
C)The donee's payment of the gift tax does not reduce the amount of the gift because it is treated as consideration paid to the donor.
D)The donor must recognize as a gain the excess of the gift tax payable over the adjusted basis of the property.

Question

Quizplus · Accepted Answer

The statement in choice C is false. The donee's payment of the gift tax reduces the amount of the gift because it is treated as consideration paid to the donor. This is known as "grossing up" the gift. The amount of the gift is increased by the amount of the gift tax paid so that the donee receives the full intended gift.

Identify Which of the Following Statements Is False