A Applicable Credit Is Subtracted in Calculating Both the Gift

question 98

Multiple Choice

A 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 applicable credit varies in amount from year to year.
• 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 tentative estate tax is reduced by only taxes payable on adjusted taxable gifts rather than gross gift taxes.
• E) None of the choices are correct.

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Definitions:

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder's equity.

Growth Rate

Growth rate refers to the percentage increase in the size or value of something over a specific period.

Retains Earnings

Profits that a company chooses to re-invest in the business rather than distribute to shareholders.

Capital Intensity Ratio

The capital intensity ratio measures the amount of capital needed per dollar of revenue; a higher ratio indicates that more assets are needed to generate income.