ExpertHard1 markMultiple Choice
CPA · Question 44 · Area IV: Individual Taxation
A taxpayer received a gift of $15,000 cash from a friend and inherited $50,000 cash from an aunt in the current year. How much of these amounts must be included in the taxpayer's gross income?
A taxpayer received a gift of $15,000 cash from a friend and inherited $50,000 cash from an aunt in the current year. How much of these amounts must be included in the taxpayer's gross income?
Answer options:
A.
$0
B.
$15,000
C.
$50,000
D.
$65,000
How to approach this question
Apply IRC §102: Gifts and Inheritances are tax-free to the recipient.
Full Answer
A.$0✓ Correct
Under IRC §102, the value of property acquired by gift, bequest, devise, or inheritance is excluded from gross income. (Note: Income earned on the gift AFTER receipt is taxable, but the principal is not).
Common mistakes
Thinking the recipient pays gift tax (the donor does).
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