Which tax is imposed on the gratuitous transfer of property between living persons?

Which tax is imposed on the gratuitous transfer of property between living persons?

• A. Estate Tax
• B. Donor's Tax
• C. Income Tax
• D. Transfer Tax

Answer: (B)

The donor's tax is specifically imposed on the transfer of property or money without any consideration, meaning it is a gratuitous transfer between living persons. This tax applies to gifts made during a donor's lifetime, capturing the value of the property transferred as it is treated as a transfer of wealth. When an individual gives a gift, they are making a donation without receiving anything in return, which is the core aspect triggering the donor's tax. The government has established this tax to ensure that substantial wealth transitions are tracked and taxed appropriately, preventing individuals from entirely sidestepping taxes on wealth as they transfer it to others while still alive. The other options do relate to transfers or taxes but do not directly capture the nature of this particular scenario where the transfer occurs while the donor is alive. The estate tax applies to the transfer of property upon death, income tax relates to earnings from various sources rather than gifts, and while transfer tax is a broader term that can include various types of taxes related to transferring property, the donor's tax is the specific tax that addresses gratuitous transfers between living persons.

The donor's tax is specifically imposed on the transfer of property or money without any consideration, meaning it is a gratuitous transfer between living persons. This tax applies to gifts made during a donor's lifetime, capturing the value of the property transferred as it is treated as a transfer of wealth.

When an individual gives a gift, they are making a donation without receiving anything in return, which is the core aspect triggering the donor's tax. The government has established this tax to ensure that substantial wealth transitions are tracked and taxed appropriately, preventing individuals from entirely sidestepping taxes on wealth as they transfer it to others while still alive.

The other options do relate to transfers or taxes but do not directly capture the nature of this particular scenario where the transfer occurs while the donor is alive. The estate tax applies to the transfer of property upon death, income tax relates to earnings from various sources rather than gifts, and while transfer tax is a broader term that can include various types of taxes related to transferring property, the donor's tax is the specific tax that addresses gratuitous transfers between living persons.