Question

Jack is single and he made his first taxable gift of $1,000,000 in 2008. Jack made additional gifts in 2009, at which time he gave $1,792,000 to each of his three children and an additional $1,000,000 to State University (a charity). The annual exclusion in 2009 was $13,000. Recently Jack has been in poor health and would like you to estimate his estate tax should he die this year. Jack estimates his taxable estate (after deductions) will be worth $5.61 million at his death. (Refer to Exhibit 25-1 and Exhibit 25-2.) (Enter your answers in dollars and not in millions of dollars.)

Please show the work

Answer 1

Estimated Cumulative taxable transfer of Jack
Gross Estate	$5,610,000
Taxable gift in 2008	$1,000,000
Addittional gift in 2009 ($1792000 - $13000 x 3)	$5,337,000
Cumulative taxable transfer	$11,947,000
Less: Estate tax exemption	$5,490,000
Taxable transfer	$6,457,000
Amount of credit for prior taxable gift
Taxable gift in 2008	$1,000,000
Less: Applicable exemption	$1,000,000
Taxable gift	$0
Taxable gift in 2009	$5,337,000
Less: Applicable exemption (3500000-1000000)	$2,500,000
Taxable gift in 2009	$2,837,000
Tax on taxable transfer
Cumulative taxable transfer	$11,947,000
Tax @ 40% on $10947000	$4,378,800
Tax on $1000000	$345,800
Less: Unified credit	$2,141,800
Tax on taxable estate	$2,582,800