8. Computing the federal transfer tax - Practice 1 When Shen Wong 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 - Unified Credits and Applicable Exclusion Amounts for Estates and Gifts Exhibit 15.8 --- Federal Unified Transfer Tax Rates: Unified Tax Credit- Estates Year Unified Tax Credit- Gifts 2008 Applicable Exclusion Amount- Estates $2,000,000 $3,500,000 Applicable Exclusion Amount -Gifts $1,000,000 $1,000,000 $1,000,000 $345,800 $345,800 $330,800 2009 2010 2011 2012 $780,800 $1,455,800 Estate tax repealed for 2010 $1,730,800 $1,772,800 $2,045,800 $2,081,800 $2,117,800 $2,125,800 $2,141,800 $4,417,800 2013 2014 $5,000,000 $5,120,000 $5,250,000 $5,340,000 $5,430,000 $5,340,000 $5,490,000 $11,180,000 2015 $1,730,800 $1,772,800 $2,045,800 $2,081,800 $2,117,800 $2,125,800 $2,141,800 $4,417,800 $5,000,000 $5,120,000 $5,250,000 $5,340,000 $5,430,000 $5,340,000 2016 2017 2018 $5,490,000 - $11,180,000 Source: Internal Revenue Service Assignment: Chapter 15 Preserving Your Estate Use the following worksheet to calculate the federal estate tax due on Shen Wong's estate. (Hint: Enter a value of so for any line that does not apply. Use Exhibit 15.7 to calculate the tentative tax. Use Exhibit 15.8 to determine the appropriate unified tax credit.) Computing Federal Estate Tax Due Name: Shen Wong Date: 11/30/2012 Line Computation Item Amount Total Amount Gross estate Subtract sum of: (a) Funeral expenses (b) Administrative expenses $ (c) Debts (d) Other expenses Total: 1 2 $ $ $0.00 3 Result: $ 4 Subtract sum of: ( 5 Result: $ 6 Add: $0.00 7 Result: Adjusted gross estate (2) Marital deduction $0.00 (b) Charitable deduction Total: Taxable estate Adjusted taxable gifts (post-1976) Estate tax base Tentative tax on estate tax base (a) Gift tax payable on post-1976 gifts $0.00 (b) Unified tax credit $ Total: Total estate taxes Other credits Federal estate tax due s 8 Compute: $ 9 Subtract sum of: 10 Result: 5 11 Subtract: 12 (50.00) $ Result: Grade It Now Save & Continue Continue without in Assignment: Chapter 15 Preserving Your Estate Exhibits - Tax schedules and credits Exhibit 15.7 -- Unified Credits and Applicable Exclusion Amounts for Estates and Gifts: Exhibit 15.8 - Federal Unified Transf Taxable Estate Value More Than But Not More Than Tentative Tax + Percent On Excess Over Base Amount $0 10,000 $0 10,000 1,800 20% 3,800 22% 20,000 40,000 8,200 24% 60,000 26% 13,000 18,200 28% 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 30% 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 32% $10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 23,800 38,800 70,800 155,800 248,300 34% 37% 39 345,800 40 Source: Internal Revenue Code, Section 2001. 8. Computing the federal transfer tax - Practice 1 When Shen Wong 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 - Unified Credits and Applicable Exclusion Amounts for Estates and Gifts Exhibit 15.8 --- Federal Unified Transfer Tax Rates: Unified Tax Credit- Estates Year Unified Tax Credit- Gifts 2008 Applicable Exclusion Amount- Estates $2,000,000 $3,500,000 Applicable Exclusion Amount -Gifts $1,000,000 $1,000,000 $1,000,000 $345,800 $345,800 $330,800 2009 2010 2011 2012 $780,800 $1,455,800 Estate tax repealed for 2010 $1,730,800 $1,772,800 $2,045,800 $2,081,800 $2,117,800 $2,125,800 $2,141,800 $4,417,800 2013 2014 $5,000,000 $5,120,000 $5,250,000 $5,340,000 $5,430,000 $5,340,000 $5,490,000 $11,180,000 2015 $1,730,800 $1,772,800 $2,045,800 $2,081,800 $2,117,800 $2,125,800 $2,141,800 $4,417,800 $5,000,000 $5,120,000 $5,250,000 $5,340,000 $5,430,000 $5,340,000 2016 2017 2018 $5,490,000 - $11,180,000 Source: Internal Revenue Service Assignment: Chapter 15 Preserving Your Estate Use the following worksheet to calculate the federal estate tax due on Shen Wong's estate. (Hint: Enter a value of so for any line that does not apply. Use Exhibit 15.7 to calculate the tentative tax. Use Exhibit 15.8 to determine the appropriate unified tax credit.) Computing Federal Estate Tax Due Name: Shen Wong Date: 11/30/2012 Line Computation Item Amount Total Amount Gross estate Subtract sum of: (a) Funeral expenses (b) Administrative expenses $ (c) Debts (d) Other expenses Total: 1 2 $ $ $0.00 3 Result: $ 4 Subtract sum of: ( 5 Result: $ 6 Add: $0.00 7 Result: Adjusted gross estate (2) Marital deduction $0.00 (b) Charitable deduction Total: Taxable estate Adjusted taxable gifts (post-1976) Estate tax base Tentative tax on estate tax base (a) Gift tax payable on post-1976 gifts $0.00 (b) Unified tax credit $ Total: Total estate taxes Other credits Federal estate tax due s 8 Compute: $ 9 Subtract sum of: 10 Result: 5 11 Subtract: 12 (50.00) $ Result: Grade It Now Save & Continue Continue without in Assignment: Chapter 15 Preserving Your Estate Exhibits - Tax schedules and credits Exhibit 15.7 -- Unified Credits and Applicable Exclusion Amounts for Estates and Gifts: Exhibit 15.8 - Federal Unified Transf Taxable Estate Value More Than But Not More Than Tentative Tax + Percent On Excess Over Base Amount $0 10,000 $0 10,000 1,800 20% 3,800 22% 20,000 40,000 8,200 24% 60,000 26% 13,000 18,200 28% 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 30% 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 32% $10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 23,800 38,800 70,800 155,800 248,300 34% 37% 39 345,800 40 Source: Internal Revenue Code, Section 2001