Judi is confused about taxes, gifts, and unified credit. She can’t figure it all out. What would you tell her about unified credit?
Explanation
Answer: C - Unified credit must be used the first time gift tax or an estate tax is required to be paid. A taxpayer does not have the right to pay tax in lieu of using the unified credit. The total tax on the net gift or estate is calculated, then some or all of the cr3dit as may be necessary is applied against total tax due and owing on a dollar-for-dollar basis. The balance, if any, is the net tax due. If the credit is not fully utilized on one transaction, the balance will carry over to another, later transaction. If credit remains after calculating any tax due at death, the credit vanishes and no one gets the benefit of it.
