As the first gift from their estate, Lily and Tom Phillips plan to give

$20,290

to their son, Raoul, for a down payment on a house.

a. How much gift tax will be owed by Lily and Tom?

b. How much income tax will be owed by Raoul?

c. List three advantages of making this gift.

How much gift tax will be owed by Lily and Tom? (Select the best answer below.)

A.

There will be no gift tax owed by Lilly and Tom on their

$20,290

gift to Raul because a couple can transfer

$28,000

per year (for

2014)

to any number of people free of gift tax, a maximum of

$14,000

from each spouse.

B.

Lily and Tom will owe gift taxes (at their marginal tax rate) on

$6,290,

the difference between the gift and the tax-free

$14,000

maximum (for

2014).