Final answer:
The role of intent in determining whether a transfer is a gift and not subject to income tax is significant. The donor must have the intention of making a present donative transfer, without expecting anything in return. If the transfer is made with the intention of repaying a debt, it would not be considered a gift.
Step-by-step explanation:
The role of intent in determining whether a transfer is a gift and therefore not subject to income tax is significant. In order for a transfer to be considered a gift and not taxable, the donor must have the intention of making a present donative transfer, without expecting anything in return. The presence of intent is crucial in differentiating a gift from a transaction or a payment. For example, if a person transfers money to another person with the intention of repaying a debt, it would not be considered a gift and would be subject to income tax.