Financial Planner

Answer: A - Net gifts occur when the donee agrees to pay any fit tax due. In this way, the gross amount of a gift is reduced by the amount of gift tax the donee pays. Rules for net gifts: a) the actual gift tax liability is lowered because the gift taxes paid reduce the value of the taxable gift b) the donor’s unified credit must be used to compute the donee’s gift tax liability c) for estate tax purposes, only the net amount of the gift is considered in the estate tax computation as an adjusted taxable gift d0 for income tax purposes, a net gift is treated as part sale and part gift to the extent that the gift tax paid by the donee exceeds the donor’s basis in the property.