Roland had a taxable estate of $7.8 million when he died this year. Calculate th
ID: 2584221 • Letter: R
Question
Roland had a taxable estate of $7.8 million when he died this year.
Calculate the amount of estate tax due (if any) under the following alternatives. (Refer to Exhibit 25-1 and Exhibit 25-2.)
a. Roland’s prior taxable gifts consist of a taxable gift of $1 million in 2005. (Enter your answers in dollars and not in millions of dollars.)
Roland had a taxable estate of $7.8 million when he died this year.
Calculate the amount of estate tax due (if any) under the following alternatives. (Refer to Exhibit 25-1 and Exhibit 25-2.)
b. Roland’s prior taxable gifts consist of a taxable gift of $1.5 million in 2005. (Enter your answers in dollars and not in millions of dollars.)
c. Roland made a $1 million taxable gift in the year prior to his death. (Enter your answers in dollars and not in millions of dollars.)
Explanation / Answer
ANSWER TO Q.NO : (a)
Current taxable gifts in 2005 $ 1,000,000
Prior taxable gifts (none ) + 0
Cumulative gifts (2005) $ 1,000,000
Tax on cumulative gifts $ 345,800
less current tax on prior taxable gifts $ 0
Tax on current taxable gifts $ 345,800
Unified credit in 2005 $ 345,800
less unified credit previously used $ 0
Unused unified credit -$ 345,800
Gift tax due and paid in 2005 $ 0
Adjusted taxable gifts $ 1,000,000
Taxable estate + 5,500,000
Cumulative taxable transfers $ 6,500,000
Tax on cumulative transfers $2,255,800
Gift tax on prior gifts $ 345,800
Unified credit in 2005 -$ 345,800
Gifts tax paid in 2005 0
Tax on taxable estate $ 2,255,800
Unified credit - $ 1,730,800
Estimated estate tax due $ 525,000
ANSWER TO (b) :
Current taxable gifts in 2005 $ 1,500,000
Prior taxable gifts (none ) + 0
Cumulative gifts (2005) $ 1,500,000
Tax on cumulative gifts $ 555,800
less current tax on prior taxable gifts $ 0
Tax on current taxable gifts $ 555,800
Unified credit in 2005 $ 345,800
less unified credit previously used $ 0
Unused unified credit -$345,800
Gift tax due and paid in 2005 $ 210,000
Adjusted taxable gifts $ 1,500,000
Taxable estate + 5,500,000
Cumulative taxable transfers $ 7,000,000
Tax on cumulative transfers $2,430,800
Gift tax on prior gifts $ 555,800
Unified credit in 2005 -$ 345,800
Gifts tax paid in 2005 $ 210,000
Tax on taxable estate $ 2,220,800
Unified credit - $ 1,730,800
Estimated estate tax due $ 490,000
ANSWER TO (c) :
If roland died within 3 years of the 2008 gift , the estate must be grossed up by the amount of the gift tax paid on the gift of 2007 because the gift was made within 3 years of the decendent's death , otherwise the answer will be identical to b)
Current taxable gifts in 2008 $ 1,000,000
Prior taxable gifts (none ) + 0
Cumulative gifts (2007) $ 1,000,000
Tax on cumulative gifts $ 345,800
less current tax on prior taxable gifts $ 0
Tax on current taxable gifts $ 345,800
Unified credit in 2007 $ 345,800
less unified credit previously used $ 0
Unused unified credit -$345,800
Gift tax due and paid in 2007 $ 0
Adjusted taxable gifts $ 1,000,000
Gift tax paid within 3 years of Death $ 0
Taxable estate + 5,500,000
Cumulative taxable transfers $ 6,500,000
Tax on cumulative transfers $2,255,800
Gift tax on prior gifts $ 345,800
Unified credit in 2007 -$ 345,800
Gifts tax paid in 2007 0
Tax on taxable estate $ 2,255,800
Unified credit - $ 1,730,800
Estimated estate tax due $ 525,000
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