Question

Exercise 27-25 (LO. 6)

At his death, Andrew was a participant in his employer's contributory qualified pension plan. His account reflects the following:

Employer's contribution	$1,000,000
Andrew's contribution (made with after-tax dollars)	800,000
Income earned	500,000

a. As to this plan, how much is included in Andrew's gross estate?

b. If the account balance is paid to Andrew's surviving wife, how much qualifies for the marital deduction?

c. How much is subject to the Federal income tax?

Answer 1

a. As to this plan $1,800,000 is already included in Andrew's Gross Estate as employer's contribution and Andrew's Contribution as part of Gross Estate of the deceased person.

Income of $500,000 is not yet included in the Gross Estate but will form part of it.

b. The entire amount if Employer and Andrew Contribution of $1,800,000 would be subject to Marital Deduction as the same would have been not taxable in Andrew's Hand.

c. Income Earned of $500,000 is subject to Federal Income tax. Capital Gain Tax shall be levied on the same.