Your client has made previous lifetime gifts that have fully exhausted his applicable credit amount. He has asked you to advise him about the tax consequences of transferring his closely held business, valued at 350,000 to his daughter in exchange for a series of fixed single life annuity payments having a present value of 300,000.

You should inform him the most important tax implication of his intrafamily business transfer is that?

He will have to included 50,000 minus one annual exclusion in adjusted taxable gifts in his estate tax calculation as an adjusted taxable gift

If he has received less than 300,000 from his daughter before he dies, he will have to include the present value of the difference in his gross estate.

He will be making a taxable gift of $350,000 because of chapter 14 rules required his interest to be valued at zero.

He will be making a taxable gift of 50,000 because the value of the transferred business exceeds the present value of the expected annuity payments