Question

1. Valdez dies in 2016, leaving a taxable estate of $6,400,000. In 2008, he made a taxable gift of $300,000 upon which he paid no tax due to the availability of the unified tax credit. Compute Valdez’s estate tax. Click to access Exhibit 27-1, Unified Tax Credit, Unified Transfer Tax (2011 - 2012) and Unified Transfer Tax (2012) to use for this problem. Valdez’s estate tax is ________ 2. During 2016, Charley wants to take advantage of the annual exclusion and make gifts to his 4 married children (including their spouses) and his 14 minor grandchildren. a. How much property can Charley give away without creating a taxable gift? $_________ b. How does your answer change if Charley’s wife, Coleen, elects to join in making the gifts? ___________ 3.Using property she inherited, Myrna makes a gift of $6,200,000 to her adult daughter, Doris. The gift takes place in 2016. Neither Myrna nor her husband, Greg, has made any prior taxable gifts. Click here to access the Exhibit 27.1 and Unified Transfer Tax to use for this problem. If an amount is zero, enter "0". a. If the § 2513 election to split gifts is not made, the taxable gift is $and gift tax due on the gift is _________

Answer 1

1. Valdez's estate tax
Taxable estate	$6,400,000
Taxable gift in 2008	$300,000
Total Taxable gift and estate	$6,700,000
Less: Unified tax credit 2016	$5,450,000
Taxable estate	$1,250,000
Tax on $1000000	$345,800
Tax on remaining $250000 @ 40%	$100,000
Valdez's estate tax	$445,800
2.a. Annual exclusion for year 2016 is $14,000, thus Charley can give away
$14000 without creating a taxable gift.
b. If Coleen elect to join in making the gifts , they both can give away $28,000
($14,000 each) without creating a taxable gift.
3. Taxable gift and gift tax due
Gift made	$6,200,000
Less: Annual exclusion	$14,000
Gift above annual exclusion	$6,186,000
Less: Unified credit	$5,450,000
Taxable gift	$736,000
Tax on first $500,000	$155,800
Tax on remaining $236,000 (736000-500000) @ 37%	$87,320
Gift tax due	$243,120