Which statement about lifetime taxable gifts is TRUE?

Which statement about lifetime taxable gifts is TRUE?

• A. The unified credit may not be used in whole or in part.
• B. Taxes due as a result of the gift are the responsibility of the donee.
• C. $30,000 annual present interest exclusion per donee is available.
• D. The unified credit may be used to the extent available to eliminate or reduce the tax due.

Answer: (D)

Lifetime gifts are subject to gift tax, and the donor is the one who pays that tax. The unified credit is a lifetime credit that offsets gift tax (and estate tax) to the extent it’s available. You apply this credit against the tax due on the gifts; if the gifts don’t generate enough tax to use the full credit, the tax is reduced to zero for that portion, and any unused credit can still play a role in reducing estate tax later. In short, the unified credit is used to eliminate or reduce the gift tax to the extent it’s available, which is why that statement is true.

Lifetime gifts are subject to gift tax, and the donor is the one who pays that tax. The unified credit is a lifetime credit that offsets gift tax (and estate tax) to the extent it’s available. You apply this credit against the tax due on the gifts; if the gifts don’t generate enough tax to use the full credit, the tax is reduced to zero for that portion, and any unused credit can still play a role in reducing estate tax later. In short, the unified credit is used to eliminate or reduce the gift tax to the extent it’s available, which is why that statement is true.