Assume the same facts as in Problem 13-57 except the joint tenancy land was held in the names of Bonnie and her son Doug, joint tenants with right of survivorship. Also assume that Bonnie provided 55% of the consideration to buy the land and that Bonnie's executor did not elect to claim the marital deduction on the QTIP trust. Assume further that no taxable gift arose on the purchase of the joint tenancy land.
In Problem 13-57
Bonnie died on June 1, 2013, survived by her husband, Abner, and two sons, Carl and Doug. Bonnie's only lifetime taxable gift was made in October 2010 in the taxable amount of $1.25 million. She did not elect gift splitting. By the time of her death, the value of the gifted property (stock) had declined to $1.1 million.
Bonnie's executor discovered the items shown below. Amounts shown are the FMVs of the items as of June 1, 2013.
Cash in checking account in her name ............................................. $ 127,750
Cash in savings account in her name ............................................... 430,000
Stock in names of Bonnie and Doug, joint tenants with right of
survivorship. Bonnie provided all the consideration ($3,000)
to purchase the stock. ................................................................. 25,000
Land in names of Bonnie and Abner, joint tenants with right of
survivorship. Abner provided all the consideration to purchase
the land. ............................................................................... 360,000
Personal residence in only Bonnie's name ....................................... 450,000
Life insurance on Bonnie's life. Bonnie was owner, and Bonnie's
estate was beneficiary (face value) ............................................... 5,000,000
Trust created under the will of Bonnie's mother (who died in 2000).
Bonnie was entitled to all the trust income for life, and she could
will the trust property to whomever she desired. She willed it to
her sons in equal amounts. ...................................................... 700,000
Bonnie's debts, as of her date of death, were $60,000. Her funeral and administration expenses were $9,000 and $71,000, respectively. Her estate paid state death taxes of $65,000. The executor elected to deduct the administration expenses on the estate tax return. Bonnie's will included the following:
I leave my residence to my husband Abner.
$250,000 of property is to be transferred to a trust with First Bank named as trustee. All of the income is to be paid to my husband, Abner, semiannually for the rest of his life.
Upon his death the property is to be divided equally between my two sons or their estates.
I leave $47,000 to the American Cancer Society.
Assume the executor elected to claim the maximum marital deduction possible. Compute the following with respect to Bonnie's estate:
a. Gross estate
b. Taxable estate
c. Adjusted taxable gifts
d. Estate tax base and basic exclusion amount portable to Abner
e. Tentative tax on estate tax base
f. Federal estate tax payable