Question

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Roland had a taxable estate of $15.9 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.) (Enter your answers in dollars and not in millions of dollars.)

a. Roland’s prior taxable gifts consist of a taxable gift of $1 million in 2005.

Answer 1

If there are any lifetime taxable gifts that were made by the person before their death, they are to be subtracted from the threshold limit to arrive at the threshold limit available for computing the Estate tax

In this case Roland's prior taxable gifts should be considered in reducing the threshold limit.The adjusted threshold limit would be $10.58 million (11.58 - 1)

The Taxable estate after considering the threshold exemption is $5.32 million (15.9 - 10.58)

The federal tax due on the same is $2.128 million (5.32 x 40%)

Note -

1.Estate tax is the tax imposed on the total value of a person's estate at the time of their death

2.For estates above the threshold, only the amounts that exceed the threshold for that year are taxable

3.The threshold limit for 2020 is $11.58 million