Emily Smith, a widow, died in 2008 at age 75. Prior to her retirement 10 years ago,
Question:
Emily Smith, a widow, died in 2008 at age 75. Prior to her retirement 10 years ago, Emily had been a corporate secretary. Emily is survived by a daughter, Eva, a son-in-law, and three grandchildren. Most of Emily's assets were left to her by her later husband, Henry Smith, who was an airline executive when he died 12 years ago.
After Henry's death, Emily became the sole owner of their personal residence. Eight months before her death, Emily deeded the property to her daughter Eva in exchange for a written agreement stating that she would be allowed to live in the house as long as she wanted. Emily retained title to the furnishings.
Under Emily's will, she left $500,000 to State University. Her deductible funeral and administration expenses are $125,000, and her deductible debts are $75,000. The full amount of the applicable credit amount is available for her estate, and state death taxes are $60,000. Emily's date of death is the applicable date for federal estate tax valuation.
Emily's Situation on the Date of Her Death
Type of Asset | Fair Market Value | Owner(s) |
Checking account | $20,000 | Emily |
Money market funds | $540,000 | Emily |
Common stock | $1,200,000 | Emily and Eva, as joint tenants with rights of survivorship. Emily and Eva equally contributed to the purchase of the stock. |
Personal residence | $550,000 | Eva |
401(k) plan benefit | $900,000 | Emily. At Emily's death the plan trustees are to pay the plan benefit to her husband, Henry, if living, otherwise to her estate in a lump sum. |
Household furnishings | $130,000 | Emily |
Automobile | $15,000 | Emily |
QTIP trust | $750,000 | Trustee, under the provisions of Henry Smith's testamentary trust. Emily receives the annual income, and at her death the trust corpus passes to Eva. |
- Prepare a list of assets, with their values, that would be included in Emily's gross estate for federal estate tax purposes.
Compute the federal estate tax payable for Emily's estate.
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson