Question

In: Accounting

Will is single and owns the following: House, solely owned, FMV of $3,200,000 Auto, solely owned,...

Will is single and owns the following:
House, solely owned, FMV of $3,200,000
Auto, solely owned, FMV of $25,000
Stock Portfolio, solely owned, FMV $6,000,000
Bank account, JTWROS with his daughter, FMV $1.5 Million
401k vested account balance of $3.5 million, with his son being the beneficiary

If Will's Last Will had called for a $500,000 charitable contrubution to the Red Cross, how much would it have saved the estate in estate taxes?

Solutions

Expert Solution

Hey there !!

Let me help you with the calculation of the Net Estate on which the Estate tax will be liable.

For this we first calculate Gross Estate, Deduct certain allowabkle deductions such as Estate Expenses/ debt and other allowable charitable deductions etc from that to calculate Net Estate.

From net estate we substract the exemption limit and estate tax is then levied on residual balance of thr estate.

Refer the step by step solution below:

Assets Owned by Mr Will
Particulars FMV % to be included in Gross Estate Value
House        3,200,000 100%
Auto              25,000 100%
Stock Portfolio        6,000,000 100%
Bank Account (Jointly with Daughter)        1,500,000 100%
401k Vested Account Balance (Son is beneficiary)        3,500,000 100%
Gross Estate      14,225,000
Less Charitable Contribution to Red Cross            500,000
Net Estate      13,725,000
Less Exemption      11,180,000
Taxable Estate       2,545,000

Note :

Since, Will is Single ie he has no spouse, 100 % of Assets will be in his name itself.

You may also note that If the Bank account/ Assets/ Other investments etc are in the individual's name only, the entire value is included; if the account is jointly held with spouse, then only 50% of the value is included and if the account is in joint names with someone other than spouse, 100% of the value is included unless it can be proven that the other account owners made contributions to the account.

I hope that the above solution is clear to you now. Do let me know in case of any concerns.

All the best !! Happy studyin


Related Solutions

Will is single and owns the following: House, solely owned, FMV of $3,200,000 Auto, solely owned,...
Will is single and owns the following: House, solely owned, FMV of $3,200,000 Auto, solely owned, FMV of $25,000 Stock Portfolio, solely owned, FMV $6,000,000 Bank account, JTWROS with his daughter, FMV $1.5 Million 401k vested account balance of $3.5 million, with his son being the beneficiary. If Will died today what would be the value of his probate estate? What about the value of his gross estate? Please show your work.
Tamika owned 200 shares of Gold Corporation with a basis of $12,000 and a FMV of...
Tamika owned 200 shares of Gold Corporation with a basis of $12,000 and a FMV of $24,000. Tamika received 20 stock rights as a nontaxable distribution with a total FMV of $8,000. Tamika sold the stock rights for $4,000. Tamika's gain or loss on the sale was (LABEL AND SHOW ALL WORK WITH CALCULATIONS) A) $1,000. B) $3,000. C) $4,000. D) ($4,000).
White Corporation owns a rental building (its only asset) with a gross FMV of $1,000, subject...
White Corporation owns a rental building (its only asset) with a gross FMV of $1,000, subject to a nonrecourse mortgage of $400. White’s adjusted basis for this building is $300. Abby owns all of White’s stock, with a total basis of $100. White has $200 of E&P. White is on the accrual method of accounting and reports on the calendar year. Assume that the corporate tax payable by White on $700 gain is $250 and on $600 gain is $200....
Paul owns undeveloped land (a capital asset, FMV $100,000 and adjusted basis $40,000) and transfers the...
Paul owns undeveloped land (a capital asset, FMV $100,000 and adjusted basis $40,000) and transfers the land to the newly created Three Dog Corporation in exchange for the alternative consideration listed below. Assume there is no Original Issue Discount (OID) in any debt, there is not any non-qualified preferred stock and Paul is the sole shareholder. What is the income recognition, if any, and basis consequences to Paul and Three Dog Corporation on the different exchanges listed below? a. 20...
Barb owns all 100 shares of Lattice Corporation stock having a $ 0.85 million FMV. Her...
Barb owns all 100 shares of Lattice Corporation stock having a $ 0.85 million FMV. Her basis in the stock is $ 450000. Lattice​'s​E&P balance is $ 400000. Nick would like to purchase the stock but wants only the​ corporation's non-cash assets valued at $ 700000. Nick is willing to pay $ 700000 for these assets. Requirement a. What are the tax consequences to Barb​,Nick​,and Lattice if Nick purchases 75 shares of Lattice stock for $700,000 and Lattice redeems Barb​'s...
Suppose you want to test whether you can solely rely on assessment to predict house price,...
Suppose you want to test whether you can solely rely on assessment to predict house price, that is, knowing housing characteristics will not help you predict housing price, once assessment is included in the model. Using a sample of 125 houses, you have estimated Price= α+ β1 assess+ β2 lotsize+ β3 sqrft+ β4 bdrms+ u and you decide to do a test at the 5% significance level. Then your best approach to answering the question is to a) check each...
A wall in a house contains a single window. The window consists of a single pane...
A wall in a house contains a single window. The window consists of a single pane of glass whose area is 0.16m^2 and whose thickness is 2.0 mm. Treat the wall as a slab of the insulating material styrofoam whose are and thickness are 18m ^ 2 and 0.10 m, respectively. Heat is lost via conduction through the wall and the window. The temperature difference between the inside and outside is the same for the wall and the window. Of...
What describes a day of personal use the property owner rented his house to his employer for $50. the FMV is $75 a day.
What describes a day of personal use the property owner rented his house to his employer for $50. the FMV is $75 a day.
Roach owned a truck with a large crane attached. Roach took the truck to Vern’s Auto...
Roach owned a truck with a large crane attached. Roach took the truck to Vern’s Auto to have the crane removed with the intention of mounting it on another vehicle in the future. Vern’s allowed Roach to leave the crane in its yard, assuring him it would be safe. A few months later, Roach decided to sell the crane. When he went to get the crane, it was gone. Vern’s had no idea what had happened to it, and because...
Michael lives on an island and owns a beach house worth $400,000. Of that, $100,000 is...
Michael lives on an island and owns a beach house worth $400,000. Of that, $100,000 is the cost of land and $300,000 is the cost of the structure. The probability that a hurricane destroys his house is 3 percent (he will still own the land). Michael can purchase hurricane insurance at the price of $2 for each $100 of coverage. 1. What is Michael’s contingent consumption bundle if Michael does not purchase insurance? 2. What is Michael’s contingent consumption bundle...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT