Would the result be different if D and Junior were relatives

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Question 1. Having made no prior taxable gifts during the current year, D transferred title to her car to her 16 year old son, saying, "this is for you. Now, I won't have to drive you everywhere." The car had a value of $21,000 at the time of the transfer. D asks you whether she should file a federal gift tax return reporting the transaction. (Assume that D is not married.)

Problem a. What would be the result if D sold the car to her son in return for her son's agreement to pay $12,000 to his sister (D's daughter), a 21 year old college student whose tuition D otherwise was paying?

Question 2. D purchased a used car for $4,000 from Junior's Used Cars. The fair market value of the car was only $2,500.

Problem a. Has D made a gift of $1,500 to Junior?

Problem b. Would the result be different if D and Junior were relatives?

Reference no: EM132464746

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