In 2020, Lilly Makes Taxable Gifts Aggregating $12 Million After

question 14

Essay

In 2020, Lilly makes taxable gifts aggregating $12 million after annual exclusion reduction. Her only other taxable gifts amount to $1 million (after annual exclusion amounts), all of which were made in 2018. What is her gift tax liability?

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Definitions:

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue.

Perpetual Inventory System

An inventory management system where inventory levels are updated in real-time with each sale or purchase, providing a continuous record of inventory counts.

Periodic Inventory System

An inventory system that updates inventory balances after a set period by taking a physical inventory count.

First-In, First-Out (FIFO)

An inventory valuation method that assumes the first items placed into inventory are the first sold, affecting the cost of goods sold and inventory value.