Question

Mr. Jackson died on June 19 when the total FMV of his property was $23 million and his debts totaled $2.789 million. His executor paid $23,000 funeral expenses and $172,000 accounting and legal fees to settle the estate. Mr. Jackson bequeathed $500,000 to the First Lutheran Church of Milwaukee and $1 million to Western Wisconsin College. He bequeathed his art collection (FMV $6.4 million) to his wife and the residual of his estate to his three children. Assume the taxable year is 2020. Note that Congress adjusted the lifetime exclusion rate subsequent to publication. Required:

A-Compute Mr. Jackson’s taxable estate.

B-Compute the estate tax payable by Mr. Jackson’s executor if Mr. Jackson made no taxable gifts during his lifetime.

C-Compute the estate tax payable by Mr. Jackson’s executor if Mr. Jackson made a substantial taxable gift in 2011 and used $5 million of his lifetime transfer tax exclusion to reduce the amount on which gift tax was owed to zero.

Answer 1

A. Computation of Mr. Jackson's Taxable Estate

Particulars	Amount
Fair Market Value of the property	$2,30,00,000
Less: Debts	$27,89,000
Less: Funeral Expenses	$23,000
Less: Accounting and Legal Fees	$1,72,000
Less: Charitable Contributions($1 million + $5,00,000)	$15,00,000
Less: Donation to wife	$64,00,000
Less: Estate Tax Exemption for the year 2020	$1,15,80,000
Taxable Estate for the year	$5,36,000

B. Computation of Estate Tax payable by Mr. Jackson's executor if Mr. Jackson made no taxable gifts during his lifetime.

Estate Tax Payable = Taxable Estate Tax for the year X 40%

                              = $5,36,000 X 40%

                              = $2,14,400.