Discuss American College HS330 Exam Topic 4 Question 124

Alan, a widower, is a retired executive with substantial assets. He wishes to provide for the financial security of his two grandchildren since their father, Alan's son, has always managed money poorly. This year Alan would like to provide each grandchild with a substantial gift. Which of the following statements concerning the impact of the generation-skipping transfer tax (GSTT) on these transfers is correct?

AA direct gift of $1.5 million to each grandchild made during Alan's life time is exempt from GSTT.

BAny GSTT applicable to the gifts is imposed at a marginal rate based on Alan's wealth.

CAlan could avoid all GSTT by holding all his property until death and providing direct bequests for the grandchildren in his will.

DFederal estate or gift tax will also be imposed on the gifts that are subject to the GSTT.

Suggested Answer: D

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20 comments · newest first

Julianna 1 month ago

I lean towards B. The tax rate depends on Alan's total wealth.

Olen 1 month ago

D makes sense too. GSTT and estate tax could overlap.

Gwenn 2 months ago

I feel C is risky. Holding until death could complicate things.

Maurine 2 months ago

Yes, but $1.5 million is under the lifetime exemption.

Sonia 2 months ago

But isn't there a limit on the exemption?

Leonora 2 months ago

I think A is correct. Gifts during life can be exempt.

Bettina 2 months ago

I doubt he can dodge all taxes just by bequeathing in a will.

Polly 2 months ago

D is correct, GSTT and estate tax can overlap.

Paul 3 months ago

Wait, can he really avoid GSTT by just waiting until death?

Kattie 3 months ago

Totally agree, the GSTT applies here.

Sang 3 months ago

A direct gift of $1.5 million isn't exempt from GSTT.

Cassandra 3 months ago

I thought gifts under a certain amount were exempt, though?

Serita 3 months ago

Federal estate tax will definitely come into play with those gifts.

Pamella 4 months ago

Wait, can he really avoid GSTT by waiting until death? Sounds too good to be true.

Stefania 5 months ago

Totally agree, the GSTT applies here.

Desire 5 months ago

A direct gift of $1.5 million is not exempt from GSTT.

Carisa 6 months ago

I’m a bit confused about the marginal rate mentioned in B. Does it really depend on Alan’s wealth, or is it a flat rate for everyone?

Vivan 6 months ago

I practiced a question similar to this, and I feel like the GSTT is definitely a separate tax from the federal estate or gift tax, so D might be correct.

Carlota 6 months ago

I think option C sounds familiar, like if he waits until death, he might avoid GSTT, but I’m not completely confident about that.

Willie 6 months ago

I remember something about the GSTT exemptions, but I'm not sure if a direct gift of that size would really be exempt.

American College HS330 Exam - Topic 4 Question 124 Discussion