Are gifts made to political entities subject to donor's tax?

The correct answer indicates that gifts made to political entities are typically exempt from donor's tax. This exemption is rooted in the principle that contributions to political organizations often serve a public interest and are seen as a way for individuals to participate in the democratic process. Tax laws are designed to encourage this form of civic engagement by not taxing monetary gifts made for political purposes.

Understanding this exception is important because it reflects the broader intention of tax policy regarding political contributions, which aims to maintain a level playing field in the political arena. The exemption from donor's tax helps facilitate the funding of political campaigns and advocacy without the financial burden of taxation.

In general, the other options are not consistent with the tax treatment of political contributions. Gifts being subject to tax always or only during election years would impose unnecessary restrictions and deter participation in political processes. Additionally, stating that gifts are taxed only if they exceed a certain limit does not align with the current framework of tax law regarding political donations.