Jack is single and he made his first taxable gift of $1,000,000 in 2008. Jack ma
ID: 2486137 • Letter: J
Question
Jack is single and he made his first taxable gift of $1,000,000 in 2008. Jack made no further gifts until 2009, at which time he gave $1,750,000 to each of his three children and an additional $1,000,000 to State University (a charity). The annual exclusion in 2009 was $13,000. Recently Jack has been in poor health and would like you to estimate his estate tax should he die this year. Jack estimates his taxable estate (after deductions) will be worth $5.4 million at his death. (Reference the tax rate schedule in Exhibit 25-1and the Unified Credit schedule in Exhibit 25-2to answer this problem.) (Enter your answer in dollars not in millions.)
Estate Tax =
Exhibit 25-1: http://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/spilker_7e/exhibit_25_1.jpg
Exhibit 25-2: http://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/spilker_7e/exhibit_25_2.jpg
Explanation / Answer
TAXABLE ESTATE OF JACT AFTER DEDUCTION = $5400000
LESS EXEMPTION FOR 2009- 2010 = ($3500000)
BALANCE TAXABLE ESTATE = $1900000
TAX ON FIRST $1000000 IS $345800
TAX ON REST $900000 IS ($900000 * 40%) = $360000
TOTAL ESTATE TAX ($345800 + $360000) = $705800
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