Jones is seriously ill and has $6 million of property that he wants to leave to his
Question:
Jones is seriously ill and has $6 million of property that he wants to leave to his four children. He is considering making a current gift of the property (rather than leaving the property to pass through his will). Assuming any taxable transfer will be subject to the highest transfer tax rate. (Reference the tax rate schedule in Exhibit 25-1 and the Unified Credit schedule in Exhibit 25-5)
Required:
a). Determine how much gift tax Jones will owe if he makes the transfer now.
b). If he makes a current gift, how much estate tax will Jones save if he dies after three years, during which time the property appreciates to $6.8 million?
TAX BASE EQUAL TO OR OVER | NOT OVER | TENTATIVE TAX | PLUS | OF AMOUNT OVER |
$ 0 | $ 10,000 | $ 0 | 18% | $ 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 | 750,000 | 155,800 | 37 | 500,000 |
750,000 | 100,000 | 248,300 | 39 | 750,000 |
1,000,000 | 345,800 | 40 | 1,000,000 |
THE EXEMPTION EQUIVALENT
YEAR OF TRANSFER | GIFT TAX | ESTATE TAX |
1986 | $ 500,000 | $ 500,000 |
1987-1997 | 600,000 | 600,000 |
1998 | 625,000 | 625,000 |
1999 | 650,000 | 650,000 |
2000-2001 | 675,000 | 675,000 |
2002-2003 | 1,000,000 | 1,000,000 |
2004-2005 | 1,000,000 | 1,500,000 |
2006-2008 | 1,000,000 | 2,000,000 |
2009-2010* | 1,000,000 | 3,500,000 |
2011 | 5,000,000 | 5,000,000 |
2012 | 5,120,000 | 5,120,000 |
2013 | 5,250,000 | 5,250,000 |
2014 | 5,340,000 | 5,340,000 |
2015 | 5,430,000 | 5,430,000 |
2016 | 5,450,000 | 5,450,000 |
2017 | 5,490,000 | 5,490,000 |
Taxation of Business Entities 2018 Edition
ISBN: 9781260174441
9th edition
Authors: Brian C. Spilker , Benjamin C. Ayers, John A. Barrick, Edmund Outslay , John Robinson , Connie Weaver Ronald G. Worsham