Rules: Every transfer of money or property, whether real or personal, tangible or intangible, for less than adequate or full consideration is a gift. A donor may exclude the maximum allowable amount of gifts according to the tax law each year made to each donee. In addition, there are four items that qualify for unlimited exclusion from gift tax: (1) payments made directly to an educational institution for a donee's tuition, (2) payments made directly to a health care provider for medical care, (3) charitable gifts, and (4) marital transfers. Relationship of the donee to the donor is not of consequence.

Choice "b" is correct. Per the above rule, marital transfers are excluded from gift tax. In this case, Suzanne inherited $1,000,000. Suzanne can give the entire $1,000,000 to George without incurring a gift tax liability.

Choice "c" is incorrect. The answer option is the annual exclusion amount given in the question of $12,000. As per the above rule, marital transfers are excluded from gift tax.

Choice "d" is incorrect. This answer option incorrectly assumes a gift-split of the two spouses (using the $12,000 annual exclusion amount). [$12,000 × 2 = $24,000]. Per the above rule, marital transfers are excluded from gift tax.

Choice "a" is incorrect. This answer option incorrectly assumes that 50% of the $1,000,000 (probably trying to trick you into applying the "joint" property rules) is the maximum amount that can be transferred to George without Suzanne incurring gift tax liability. Per the above rule, marital transfers are excluded from gift tax.