Question

Tom Hruise was an entertainment executive who had a fatal accident on a film set. Tom’s will directed his executor to distribute his cash and stock to his wife, Kaffie, the real estate to his church, The First Church of Methodology, and the remainder of his assets were to be placed in trust for his three children. Tom’s estate consisted of the following:

Assets:
Personal assets	$	1,040,000
Cash and stock		24,200,000
Intangible assets (film rights)		72,500,000
Real estate		15,200,000
	$	112,940,000
Liabilities:
Mortgage	$	3,400,000
Other liabilities		4,300,000
	$	7,700,000
a. Tom made a taxable gift of $5.30 million in 2011. Compute the estate tax for Tom’s estate. (Refer to Exhibit 25-1 and Exhibit 25-2.)(Enter your answers in dollars, not millions of dollars.)

Answer 1

Total estate = Personal assets + Intangible assets + Cash and stock + Real estate

                   = $1,040,000 + $72,500,000 + $24,200,000 + $15,200,000

                   = $112,940,000

Total taxable value = Total estate – Marital deduction – Charitable deduction – Mortgage – Other liabilities + Taxable gift

= $112,940,000 – $24,000,000 – $15,000,000 – $3,400,000 – $4,300,000 + $5,300,000

= $71,540,000

Current tax on adjustable gift = $71,540,000*35%

                                                = $25,039,000

Estate tax due = Current tax – Unified credit in 2011

                        = $25,039,000 – $1,730,800

                        = $23,308,200