Which of the following is not a requirement for receiving a gift to be exempt from donor's tax?

Which of the following is not a requirement for receiving a gift to be exempt from donor's tax?

• A. It must be recorded in writing
• B. It must be below the annual exclusion amount
• C. It must be for educational or medical purposes
• D. It must be reported on the tax return

Answer: (A)

To determine the requirements for a gift to be exempt from donor's tax, it's essential to recognize that not all gifts need to be recorded in writing for them to qualify for the exemption. While it is often advisable to have documentation for clarity and record-keeping purposes, especially for larger gifts, there is no legal requirement mandating that every gift must be formally recorded in writing to qualify for tax exemption. On the other hand, gifts that fall below the annual exclusion amount are automatically exempt from donor's tax, and gifts specifically designated for medical or educational purposes also qualify for special treatment under the tax code. Additionally, while it is true that certain gifts must be reported on a tax return if they exceed the annual exclusion threshold, this reporting does not apply to gifts that are within the exempt limits. Thus, the requirement that a gift must be recorded in writing is not a necessity for it to be exempt from donor's tax, making it the correct choice in this context.

To determine the requirements for a gift to be exempt from donor's tax, it's essential to recognize that not all gifts need to be recorded in writing for them to qualify for the exemption. While it is often advisable to have documentation for clarity and record-keeping purposes, especially for larger gifts, there is no legal requirement mandating that every gift must be formally recorded in writing to qualify for tax exemption.

On the other hand, gifts that fall below the annual exclusion amount are automatically exempt from donor's tax, and gifts specifically designated for medical or educational purposes also qualify for special treatment under the tax code. Additionally, while it is true that certain gifts must be reported on a tax return if they exceed the annual exclusion threshold, this reporting does not apply to gifts that are within the exempt limits.

Thus, the requirement that a gift must be recorded in writing is not a necessity for it to be exempt from donor's tax, making it the correct choice in this context.