Which of the following is subject to gift tax?

The scenario involving the trust with income for life to the son and remainder to the grandson is subject to gift tax because it constitutes a transfer of value that creates a present interest gift for the son and a future interest gift for the grandson. In this case, when property is placed in a trust that grants income to one beneficiary and a remainder interest to another, the value of the transfer to the beneficiaries is considered taxable for gift tax purposes.

This trust arrangement demonstrates a common estate planning strategy where the lifetime income is granted to one individual, securing an immediate benefit, while the remainder interest is reserved for another, which will only be available in the future. Both interests are evaluated for their values and associated gift tax implications at the time of transfer.

The other options represent scenarios that do not trigger gift tax:

• Real property held individually could be given as a gift, but it is the value over the annual exclusion that would determine if there's a taxable event.

• Gifts under $10,000 fall under the annual gift tax exclusion, meaning they do not contribute to the lifetime gift tax exemption and are not subject to gift tax.

• Revocable trust holdings do not have immediate gift tax implications since the grantor retains control over the assets, meaning they are not considered