If an individual gives multiple gifts in a single year, what pertains to their tax liability?

The correct answer centers on the fact that for tax purposes, all gifts made by an individual within a calendar year must be totaled to determine the overall tax liability. The IRS has specific gift tax exclusions that allow an individual to give up to a certain amount per recipient each year without incurring any gift tax. If the total of all gifts to one recipient exceeds this annual exclusion limit, only the amount over that limit is subject to gift tax.

This means that when an individual makes multiple gifts in a single year, it is important to aggregate these amounts to assess whether they exceed the exclusion threshold. If the total value of gifts surpasses that exclusion for any recipient, then the individual is liable for gift tax on the excess amount.

Other choices may imply limitations or exceptions that are not applicable under the general gift tax rules. For example, only taxing the largest gift or exempting gifts between family members does not accurately represent how the tax law treats cumulative gifts. The focus is on the total given, rather than individual gift amounts or the relationship between the parties involved.