An Applicable Credit Is Subtracted in Calculating Both the Gift

question 108

Multiple Choice

An applicable credit is subtracted in calculating both the gift tax and the estate tax. Why doesn't this calculation have the effect of increasing the total applicable credit amount?

• A)The tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross gift taxes.
• B)The applicable credit only offsets the exemption equivalent.
• C)The applicable credit cannot be used to offset gift taxes on adjusted taxable gifts.
• D)The applicable credit varies in amount from year to year.
• E)None of the choices are correct.

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Definitions:

Market Price

The existing selling or buying price for an asset or service in the specified market.

Price Taker

A price taker is a market participant that does not have the ability to dictate the price of a good or service but must accept the market price as given.

Perfectly Elastic

Describes a market situation where demand or supply is completely responsive to changes in price, resulting in infinite sensitivity.

Demand Curve

A diagram illustrating the link between the cost of an item and the desired quantity by buyers.