Tom Hruise was an entertainment executive who had a fatal accident on a film set
ID: 2429169 • Letter: T
Question
Tom Hruise was an entertainment executive who had a fatal accident on a film set. Tom’s will directed his executor to distribute his cash and stock to his wife, Kaffie, the real estate to his church, The First Church of Methodology, and the remainder of his assets were to be placed in trust for his three children. Tom’s estate consisted of the following: (Enter your answers in dollars, not millions of dollars.)
a. Tom made a taxable gift of $8 million in 2011. Compute the estate tax for Tom’s estate.
Assets: Personal assets $ 800,000 Cash and stock 24,000,000 Intangible assets (film rights) 71,500,000 Real estate 15,000,000 $ 111,300,000 Liabilities: Mortgage $ 3,200,000 Other liabilities 4,100,000 $ 7,300,000Explanation / Answer
Gross Estate
111,300,000.00
Less: Marital Deduction
(24,000,000.00)
Less: Charitable deduction
(15,000,000.00)
Less: Debts
(7,300,000.00)
Taxable estate
65,000,000.00
Add: Prior taxable gifts
8,000,000.00
Cumulative taxable transfers
$ 73,000,000.00
Estate Tax Rates for 2011: Over $1,000,000 = $345,800 + 40% on remaining amount
Tentative Tax = $345,800 + [($73,000,000 - $345,800) * 40%] = $29,145,800
Tax saved on applicable exemption = ($8,000,000 - $5,000,000)*40% = $1,200,000
Gross Estate Tax = Tentative Tax - Tax saved on applicable exemption
=> $29,145,800 - $1,200,000 = $27,945,800
Unified Tax Credit = $2,117,800
Estate tax due = Gross Estate Tax – Unified Tax Credit
=> $27,945,800 - $2,117,800 = $25,828,000
Gross Estate
111,300,000.00
Less: Marital Deduction
(24,000,000.00)
Less: Charitable deduction
(15,000,000.00)
Less: Debts
(7,300,000.00)
Taxable estate
65,000,000.00
Add: Prior taxable gifts
8,000,000.00
Cumulative taxable transfers
$ 73,000,000.00
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