During the taxable year, Blake transferred a corporate bond with a face amount and fair market value of $20,000 to a trust for the benefit of her 16-year old child. Annual interest on this bond is $2,000, which is to be accumulated in the trust and distributed to the child on reaching the age of 21. The bond is then to be distributed to the donor or her successor-in-interest in liquidation of the trust. Present value of the total interest to be received by the child is $8,710. The amount of the gift that is excludable from taxable gifts is:
a.
$0
b.
$8,710
c.
$13,000
d.
$20,000
Explanation
Choice “a” is correct.
Rule: An amount will not be treated as an excluded gift or bequest if the governing instrument provides that the specific sum is payable only from the “income” of the estate or trust.
Choices “d”, “c”, and “b” are incorrect, per the above rule
Can someone reword this for me?
The amount of the gift that is excludable from taxable gifts is: ZERO
In other words, what amount of the gift is INCLUDABLE?
.