Sarah and Clem Are Very Wealthy and Have a Program

question 100

Essay

Sarah and Clem are very wealthy and have a program of charitable and family giving.In 2015,they give $20,000 to each of their 4 grandchildren,$30,000 to Clem's brother,stock valued at $40,000 (basis = $20,000)to the Cancer society,and they buy a home valued at $525,000 for Sarah's mother.In addition,Clem puts $500,000 of his stock in the family's business into Sarah's name and sets up a revocable trust for Sarah's sister with $100,000 in bonds.If Clem made $1,900,000 and Sarah $1,300,000 in taxable gifts in 2014,their only prior-year taxable gifts,what are Clem's and Sarah's taxable gifts in 2015 if they elect gift splitting?

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Definitions:

Owner's Equity

The residual interest in the assets of a company after deducting liabilities, representing the owner's claim on the business assets.

Expenses

Costs incurred in the process of earning revenue, typically classified as operating or non-operating expenses.

Revenue

The total income generated from normal business operations, including the sale of goods and services before any expenses are deducted.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owner's claim on the company's assets.