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A single man with substantial assets and income is supporting his 80-year-old partially senile mother with monthly cash gifts. He is trying to find a practical way to support his mother while at the same time saving federal gift and income taxes without giving up ultimate control of any assets. Which of the following courses of action will best accomplish these objectives?
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B. Make her a gift of enough corporate bonds from his portfolio so that she will be able to support herself from the interest payments
C. Make her an interest free loan with a principal amount large enough to produce sufficient income for her support when invested in corporate bonds
D. Make her annual gifts of enough interest income from the tax free municipal bonds in his portfolio so that she will be able to support herself
Answer: D
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