C is corrent. The requirement is to determine the amount of Mann’s taxable gifts assuming that the annual exclusion is $14,000. The first $14,000 ($13,000 for 2012) of gifts of a present interest made to a donee during a calendar year are excluded in determining the amount of a donor’s taxable gifts. As a result, the $5,000 cash gift to a child does not result in a taxable gift. Additionally, there is an unlimited exclusion for tuition or medical expenses paid on behalf of a donee. Thus, the $25,000 tuition paid directly to the grandchild’s university is fully excluded and does not result in a taxable gift.
A is incorrect. The gift of tuition qualifies for an unlimited exclusion.
A is incorrect. The gift of tuition qualifies for an unlimited exclusion.
D is incorrect. The gift of tuition qualifies for an unlimited exclusion.
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