2. Estimating Estate Taxes. Laura Kim of Georgetown, Delaware, lives with her elderly grandmother, Haejeong. Her grandmother owns two profi table auto parts stores that are worth millions. Because current law has the federal estate tax going to zero in 2010 and then back to previous rules in 2011, the pair is wondering how these taxes might aff ect Haejeong’s estate.

Laura hopes that her grandmother, who is in excellent health, lives at least another 20 years. If she doesn’t, the federal estate tax will apply in all years except 2010.
If Haejeong’s probate estate is valued at $7.5 million, calculate the following:

(a) The amount of the estate subject to the federal estate tax if she dies in 2011 and Congress makes no change in the law.

(b) The amount of the federal estate tax if she dies in 2011 and Congress extends the 2009 exclusion amount and tax rate.