Question

1. A, a widow, died in 2014 with the following assets: savings account ($15,000), checking account ($1,500), certificates of deposit (S43,000), stocks and bonds (S378,000), auto ($6.000), real estate (S254.000), which is subject to a recourse mortgage of $30,000, joint and survivor checking account with her son J in which she contributed all the funds (S2,500), and personal and household goods ($15,000). A also was the beneficiary of a testamentary trust created under the will of her late husband H, pursuant to which she was entitled to the income from the trust payable at least annually and over which she had a power to appoint the entire trust assets in favor of herself during her life or to the estate on her death. The value of the trust corpus equals S4,140,000. The amount of funeral and administration expenses equals $25,000. Her will provides that all of her estate is to pass to J. a. What is the amount of A's gross estate for federal estate tax purposes? Consider $ $ 2033, 2040, and 2041. b. What is A's taxable estate assuming that her state of domicile imposes no taxes on her death? Consider $$ 2051 and 2053. c. What is A's taxable estate assuming her state of domicile imposes an estate tax equal to the maximum state death tax credit that was allowable under $ 2011 before the Tax Act of 2001? Consider $$ 2051, 2053, and 2058. d. What would be the amount of federal estate tax due under 1b and 1c? Consider $ $ 2001 and 2010. e. Would a federal estate tax return be required to be filed by A's executor? Consider $ 6018.

***************** please use 2019 not 2014

Answer 1

1

1. Calculation of gross estate

Gross estate: The gross estate consists of the value of all property owned by a decedent or in which the decedent had an interest at the time of death.

Calculation of Gross estate Particulars Working Note No. Amount $ Savings account 15,000 Checking account 1,500 Certificates of deposit 43,000 Stocks and Bonds 378,00 Auto 6,000 Real estate 254,000 Joint checking account 2,500 Personal and household goods 15,000 Trust corpus 4,140,000 Total 4,855,000

WN. 1

If the mortgage is recourse then the estate tax is calculated on the gross value of the real estate, without deducting the mortgage.

WN. 2

The full value of any property owned by the decedent as a joint tenant with a right of survivorship with another person is includable in the decedent’s gross estate. The full inclusion amount can be reduced by the amount contributed by the surviving tenant. Since in this case entire amount is contributed by A, the same is completely included in Gross estate.

WN. 3

Full value of a trust property of which the decedent is a beneficiary and has a "general power of appointment," will be included in gross estate at the full value of the trust property.

b. Calculation of Taxable Estate Taxable estate: The value of the Gross estate less the deductions allowed Amount $ 4,855,000 Calculation of Taxable estate Particulars Gross Estate Less Funeral Expense & Administration Taxable Estate Expense 25,000 4,830,000

Calculation of Maximum state death tax credit Particulars Amount $ Fixed part 290,800 Variable part -(4,830,000 less 4,040,000)* 11.2% 88,480 Total 379,280 d. Heirs or beneficiaries only pay tax when the amount of the estate that they inherit is greater than the exclusion limit established by the Internal Revenue Service (IRS). Since the taxable estate value is below the exclusion limit, no tax is payable. e. No, A's executor need not file federal estate tax return as the Gross estate does not exceed basic exclusion amount.