Question

Kevin transferred $4,000,000 to a GRAT naming his four children as the remainder beneficiaries. Kevin retained an annuity from the GRAT valued at $1,500,000. If this is his only transfer during the year, what is Kevin’s total taxable gifts for the year?

$1,444,000.

$1,500,000.

$2,440,000.

$2,500,000

Answer 1

Correct answer is option 4 ( i.e. $ 2,500,000 ).

Explanation:

The Transfer of the remainder interest is a gift to his children because it is a gift of future interest. It is not eligible for the annual exclusion - thus Kevin taxable gifts for the year is $ 2,500,000 ( 4,000,000 - 1,500,000 ).