8. Computing the federal transfer tax - Practice 1 When Bruce Armstrong died in 2012, he left an estate valued at $15,000,000. His trust directed distribution as follows: $300,000 in charitable deductions ($50,000 to the local hospital plus $250,000 to his alma mater), and the remainder to his four adult children. Death-related costs were $8,500 for funeral expenses, and $125,000 in administrative expenses ($60,000 paid to attorneys, $15,000 paid to accountants, and $50,000 paid to the trustee of his living trust. In addition, there were debts of $650,000. 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 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: Unified TaxCredit- Estates Applicable ExclusionAmount- Estates Unified Tax Credit- Gifts Applicable ExclusionAmount -Gifts Year 2006 $ 780,800 $2,000,000 $345,800 $1,000,000 2007 $780,800 $2,000,000 $345,800 $1,000,000 2008 $780,800 $2,000,000 $345,800 $1,000,000 2009 $1,455,800 $3,500,000 $345,800 $1,000,000 2010 Estate tax repealed for $330,800 $1,000,000 2010 2011 $1,730,800 $5,000,000 $1,730,800 $5,000,000 2012 $1,772,800 $5,120,000 $1,772,800 $5,120,000 2013 $2,045,800 $5,250,000 $2,045,800 $5,250,000 Use the following worksheet and Exhibits 15.7 and 15.8 in your textbook to calculate the federal estate tax due on Bruce Armstrong's estate. (Hint: Enter a value of $0 for any line that does not apply.) Computing Federal Estate Tax Due Name: Bruce Armstrong 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 (b) Charitable deduction $ Total: $ 5 Result: Taxable estate $ 6 Add: Adjusted taxable gifts (post-1976) ITIT $ 7 Result: Estate tax base $ 8 Compute: Tentative tax on estate tax base $ 9 Subtract sum of: $ (a) Gift tax payable on post-1976 gifts (b) Unified tax creditb $ Total: $ 10 Result: Total estate taxes $ 11 Subtract: Other credits $ 12 Result: Federal estate tax due $ Use Exhibit 15.7 to calculate the tentative tax. b Use Exhibit 15.8 to determine the appropriate unified tax credit