8. Computing the federal transfer tax - Practice 1

When Wolfgang Jimenez died in 2012, he left an estate valued at $20,000,000. His trust directed distribution as follows: $200,000 in charitable deductions ($75,000 to the local hospital plus $125,000 to his alma mater), and the remainder to his four adult children. Death-related costs were $7,500 for funeral expenses, and $100,000 in administrative expenses ($50,000 paid to attorneys, $10,000 paid to accountants, and $40,000 paid to the trustee of his living trust. In addition, there were debts of $450,000.

Use the following dropdown menus to obtain the relevant tax schedules and credits:

Exhibits Tax schedules and credits

Exhibit 15.7 Federal Unified Transfer Tax Rates:

Exhibit 15.8 Unified Credits and Applicable Exclusion Amounts for Estates and Gifts:

Taxable Estate Value			Tentative Tax
More Than	But Not More Than	Base Amount	+ Percent	On Excess Over
$0	10,000	$0
10,000	20,000	1,800	20%	$10,000
20,000	40,000	3,800	22%	20,000
40,000	60,000	8,200	24%	40,000
60,000	80,000	13,000	26%	60,000
80,000	100,000	18,200	28%	80,000
100,000	150,000	23,800	30%	100,000
150,000	250,000	38,800	32%	150,000
250,000	500,000	70,800	34%	250,000
500,000		155,800	37%	500,000

Use the following worksheet and Exhibits 15.7 and 15.8 in your textbook to calculate the federal estate tax due on Wolfgang Jimenezs estate. (Hint: Enter a value of $0 for any line that does not apply.)

Computing Federal Estate Tax Due
	Name: Wolfgang Jimenez		Date: 11/30/2012
Line	Computation	Item	Amount	Total Amount
1		Gross estate
2	Subtract sum of:	(a) Funeral expenses
		(b) Administrative expenses
		(c) Debts
		(d) Other expenses
		Total:		( )
3	Result:	Adjusted gross estate
4	Subtract sum of:	(a) Marital deduction
		(b) Charitable deduction
		Total:		( )
5	Result:	Taxable estate
6	Add:	Adjusted taxable gifts (post-1976)
7	Result:	Estate tax base
8	Compute:	Tentative tax on estate tax baseaa
9	Subtract sum of:	(a) Gift tax payable on post-1976 gifts
		(b) Unified tax creditbb
		Total:		( )
10	Result:	Total estate taxes
11	Subtract:	Other credits		( )
12	Result:	Federal estate tax due

aa Use Exhibit 15.7 to calculate the tentative tax.

bb Use Exhibit 15.8 to determine the appropriate unified tax credit.