Mike is a college student who has big ideas but often fails to follow through on those ideas. Mikes parents agreed to loan him $30,000 to pay for his tuition, books, and room and board. Mike is required to pay the money back to his parents, along with 6% interest, within 6 months of graduating. 2014 was Mikes 6^th year as a full-time student at TSU and his parents are concerned about Mikes lack of motivation to graduate and find a job. After his parents confronted him about the issue, Mike admitted that he had delayed graduating because he was afraid he would not be able to pay back the money his parents loaned him. Because Mikes parents love him and as an act of kindness to him, they told Mike that if he graduated they would forgive his debt and that he should not put off graduation any longer. Mike was so grateful for his parents generosity and will finally complete his general studies degree in in December, 2015. Assume Mike parents forgive the debt to Mike in December 2015 after he graduates. In addition, Mikes parents will give him a gift of $20,000 cash to help him get started on his own.

Please discuss whether Mikes parents will have made a gift to Mike in December if all of the transactions discussed above occur at that time. If there is a gift, how much is the gift and how much is a taxable gift?

Please be sure to fully explain your answer and the relevant rules.