Question

Grandma and Grandpa Generous had many children, but they have only one grandchild,Harold. Grandma and Grandpa would like to give him a gift of $5.43 million. Upon the transfer to Harold, for which taxes will Grandma and Grandpa Generoushave a current liability? Assume Grandma and Grandpa have exhausted their lifetime gifttax exemption

Answer 1

Answer:

Gift Tax GSTT

Explanation:

In such a scenario, Grandma and Grandpa Generoushave a current liability to the Gift Tax GSTT. This tax rate applies to Grandma and Grandpa Generous because the gift exceeds the limit per individual for gifting and because they have exhausted their lifetime gift-tax exemption. Meaning that they have to pay taxes on this gift of $5.43 million which according to the GSTT guidelines is a fixed rate of 40% of the gift that was given.