8. Computing the federal transfer tax - Practice 1 Aa Aa When Harold Kanewski 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 worksheet and Exhibits 15.7 and 15.8 to calculate the federal estate tax due on Harold Kanewski's estate. Enter a value of $0 for any line that does not apply. Computing Federal Estate Tax Due Date: 11/30/2012 Name: Harold Kanewski Line Computation Item Amount Total Amount 1 2 Subtract sum of: 3 Result: Subtract sum of: 4 Gross estate (a) Funeral expenses (b) Administrative expenses (c) Debts (d) Other expenses Total: Adjusted gross estate (a) Marital deduction (b) Charitable deduction Total: Taxable estate Adjusted taxable gifts (post-1976) Estate tax base Tentative tax on estate tax basea (a) Gift tax payable on post-1976 gifts (b) Unified tax credito Total: Total estate taxes Other credits Federal estate tax due 5 6 Result: Add: Result: Compute: Subtract sum of: II 7 8 9 10 11 Result: Subtract: Result: 12 *Use Exhibit 15.7 to calculate the tentative tax. Use Exhibit 15.8 to determine the appropriate unified tax credit. Exhibit 15.7 Federal Unified Transfer Tax Rates Tentative Tax Taxable Estate Value More Than But Not More Than Base Amount + Percent On Excess Over 20% 22% 24% $0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 26% $0 1,800 3,800 8,200 13,000 18,200 23,800 38,800 70,800 155,800 28% $10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 30% 32% 34% 37% Use the following dropdown menus to obtain the relevant tax schedules and credits: Exhibit 15.8 - Unified Credits and Applicable Exclusion Amounts for Estates and Gifts X Unified Tax Applicable Exclusion Unified Tax Applicable Exclusion Year Credit-Estates Amount-Estates Credit-Gifts Amount-Gifts 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$1,000,000 2008 $780,800 $2,000,000 $345,800 $1,000,000 2009 $1,455,800 $3,500,000 $345,800 $1,000,000 2010 Estate tax repealed for 2010 $330,800 $1,000,000 2011 $1,730,800 $5,000,000 $1,730,800 $5,000,000 2012 $1,772,800 $5,120,000 $1,772,800 $5,120,000 2013 $2,045,800 $5,250,000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