Which term refers to the amount of the combined total of taxable gifts and the taxable estate that is exempt from taxation?

Which term refers to the amount of the combined total of taxable gifts and the taxable estate that is exempt from taxation?

• A. Portable
• B. Lifetime exemption
• C. Unified credit
• D. Deductions

Answer: (B)

The concept being tested is the amount you can transfer tax-free under federal transfer taxes, counting both gifts during life and the estate at death. That amount is the lifetime exemption (also called the applicable exclusion amount). It represents how much combined gifts and estate value are exempt from tax. So, when the total of taxable gifts plus the taxable estate does not exceed this exemption, no federal estate or gift tax is due. Portable refers to the ability to transfer unused exemption from a deceased spouse to the surviving spouse, but it describes a feature, not the exempt amount itself. Unified credit is the tax credit that offsets tax up to that exemption amount, effectively sheltering that much from tax, but the question asks for the name of the exempt amount, which is the lifetime exemption. Deductions are general reductions of tax base and do not describe the exemption for gifts and estate taxes.

The concept being tested is the amount you can transfer tax-free under federal transfer taxes, counting both gifts during life and the estate at death. That amount is the lifetime exemption (also called the applicable exclusion amount). It represents how much combined gifts and estate value are exempt from tax. So, when the total of taxable gifts plus the taxable estate does not exceed this exemption, no federal estate or gift tax is due.

Portable refers to the ability to transfer unused exemption from a deceased spouse to the surviving spouse, but it describes a feature, not the exempt amount itself. Unified credit is the tax credit that offsets tax up to that exemption amount, effectively sheltering that much from tax, but the question asks for the name of the exempt amount, which is the lifetime exemption. Deductions are general reductions of tax base and do not describe the exemption for gifts and estate taxes.