Question

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life.
A. an estate and gift tax; to the next generation
B. a regressive tax; to non-family members
C. an excise tax; to their children
D. a progressive tax; to non-family members

Answer 1

Answer:

The answer is A: an estate and gift tax; to the next generation

Explanation:

A deceased person often via a will or according to laws of intestacy  transfers the benefit and ownership of an estate to relatives or others without any consideration. the tax paid on such a transferred asset is called estate tax. This type of tax is often imposed on the property. But practice differs as some tax jurisdictions do impose estate tax on the beneficiary of the deceased property in which case it is called inheritance tax.

Such a tax is not to be imposed if the property is bequeathed to a spouse or a charity recognized under the Federal laws.

When an individual transfers properties during his life time to another without receiving full consideration in any form in return, the tax imposed on such transfer of ownership of asset is known as gift tax. The tax is usually imposed on the giver or transferor of the assets unless a retention of an interest exist which will likely delay the completion of the gift

The major difference between an estate tax and gift tax is that estate tax is tax on transfer of property without consideration to others after demise or death. Gift tax is a tax on transfer of ownership of property without consideration during the giver's lifetime (often called an inter vivos gift)