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:

Deductible

An amount of any loss that is to be paid by the insured.

Inflationary Times

Periods characterized by a general increase in prices and fall in the purchasing value of money.

Insurance Policies

Contracts between an insurer and a policyholder, outlining the terms under which the insurer agrees to pay a benefit upon the occurrence of a specified risk or event.

Bank Interest Rates

The percentage at which interest is paid by a borrower for the use of money that they borrow from a bank.