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 $1,750,000 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 $5.4 million at his death. (Refer to Exhibit 25-1 and Exhibit 25-2.) (Enter your answers in dollars and not in millions of dollars.)

What is Jack's estate tax?

Answer 1

Step-1	Calculation of taxable transfers
	Taxable estate	$    5,400,000.00
	Taxable transfer in the year 2008	$    1,000,000.00
	Taxable transfer in the year 2009
	3*(1,750,000-17,000)	$    5,211,000.00
	Total taxable transfers	$ 11,611,000.00
Step-2	Calulation of credit for Prior taxable transfers
	Tax on taxable transfer of $6,211,000	2,430,200
	Less-Credit unified($3,500,000)	1345800
	credit for Prior taxable transfers	$    1,084,400.00
Step -3	Estate Tax due
	Tax on total taxable transfers $11,611,000	$    4,590,200.00
	Less-Available credit	$    1,084,400.00
	Less- Unified credit($ 5,250,000)	2,045,800.00
	Estate Tax due	$    1,460,000.00