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American College HS330 Exam - Topic 4 Question 124 Discussion

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?
D) Federal estate or gift tax will also be imposed on the gifts that are subject to the GSTT.
A) A direct gift of $1.5 million to each grandchild made during Alan's life time is exempt from GSTT.
B) Any GSTT applicable to the gifts is imposed at a marginal rate based on Alan's wealth.
C) Alan could avoid all GSTT by holding all his property until death and providing direct bequests for the grandchildren in his will.

American College HS330 Exam - Topic 4 Question 124 Discussion

Actual exam question for American College's HS330 exam
Question #: 124
Topic #: 4
[All HS330 Questions]

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?

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Suggested Answer: D

by Avery at Apr 06, 2026, 06:41 PM

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Sang
2 hours ago
A direct gift of $1.5 million isn't exempt from GSTT.
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Cassandra
5 days ago
I thought gifts under a certain amount were exempt, though?
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Serita
10 days ago
Federal estate tax will definitely come into play with those gifts.
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Pamella
16 days ago
Wait, can he really avoid GSTT by waiting until death? Sounds too good to be true.
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Stefania
2 months ago
Totally agree, the GSTT applies here.
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Desire
2 months ago
A direct gift of $1.5 million is not exempt from GSTT.
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Carisa
3 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?
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Vivan
3 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.
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Carlota
3 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.
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Willie
3 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.
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