Question

SUBJECT: TAXATION OF INDIVIDUALS AND BUSINESS ENTITIES (Chapter 25)

Required information

Roland had a taxable estate of $5.5 milionwhen he died this year.

Calculate the amount of estate tax due (if any) under the following alternative. (Refer to EXHIBIT 25-1 AND EXHIBIT 25-2).

a. Roland's prior taxable gifts consist of a taxable gift of $1 million in 2005. Estate tax due?

b. Roland's prior taxable gifts consist of a taxable gift of $1.5 million in 2005. Estate tax due?

c. Roland made a $1 million taxable gift in the year prior to his death. Estate tax due?

EXHIBIT 25-1

TAX BASE EQUAL TO OR OVER	NOT OVER	TENTATIVE TAX	PLUS	OF AMOUNT OVER
$ 0	$ 10,000	$ 0	18%	$ 0
10,000	20,000	1,800	20	10,000
20,000	40,000	3,800	22	20,000
40,000	60,000	8,200	24	40,000
60,000	80,000	13,000	26	60,000
80,000	100,000	18,200	28	80,000
100,000	150,000	23,800	30	100,000
150,000	250,000	38,800	32	150,000
250,000	500,000	70,800	34	250,000
500,000	750,000	155,800	37	500,000
750,000	100,000	248,300	39	750,000
1,000,000		345,800	40	1,000,000

EXHIBIT 25-2 THE EXEMPTION EQUIVALENT

YEAR OF TRANSFER	GIFT TAX	ESTATE TAX
1986	$ 500,000	$ 500,000
1987-1997	600,000	600,000
1998	625,000	625,000
1999	650,000	650,000
2000-2001	675,000	675,000
2002-2003	1,000,000	1,000,000
2004-2005	1,000,000	1,500,000
2006-2008	1,000,000	2,000,000
2009-2010*	1,000,000	3,500,000
2011	5,000,000	5,000,000
2012	5,120,000	5,120,000
2013	5,250,000	5,250,000
2014	5,340,000	5,340,000
2015	5,430,000	5,430,000
2016	5,450,000	5,450,000
2017	5,490,000	5,490,000

Please show the solution. Thank you

Answer 1

the calculations are as follows