Karen Hill (single, age 62) lives in Stanley, Idaho. She wants to do some financial planning and
Question:
Karen Hill (single, age 62) lives in Stanley, Idaho. She wants to do some financial planning and as part of that exercise, she wants you to compute what her estate tax liability would be if she died in 2022. Karen gives you the following list of everything she owns:
Asset | Adjusted Basis | Fair Market Value |
---|---|---|
Primary residence | $ 980,000 | $ 1,400,000 |
Vacation home | 375,000 | 685,000 |
Investment portfolio | 2,770,000 | 4,500,000 |
Real estate investments | 2,850,000 | 6,125,000 |
Checking and savings accounts | 250,000 | 250,000 |
Vehicle | 105,000 | 70,000 |
Personal effects | 210,000 | 75,000 |
Art collection | 72,000 | 190,000 |
Karen's will directs $100,000 be left to her church and $100,000 be given to her high school to start a scholarship fund in her name upon her death. She anticipates funeral costs of $20,000. Karen's current debts consist of a $120,000 balance on the vacation home mortgage and $25,000 on a line of credit. It is estimated that attorney and accounting fees to administer her estate will be $86,000. Karen is unmarried and intends to leave all of her assets to her surviving siblings, with the exception of the charitable contributions already noted above.
REQUIRED
Answer the following questions based on the above fact pattern. Be sure to clearly label each step of your calculations so partial credit can be awarded even if your final answer is incorrect.
- Compute the amount of estate tax due if Karen dies in 2022, assuming she never made any taxable gifts.
- Compute the amount of estate tax due if Karen dies in 2022, assuming she made one taxable gift of $1,000,000 in 2017 and used the applicable credit amount to avoid paying gift tax. (Note: A taxable gift means the amount over and above the annual exclusion amount.)
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher