Assignment: Chapter 15 Preserving Your Estate 9. Computing the federal transfer tax - Practice 2 Sean Caddell died in 2012, leaving an estate of $24,000,000. Sean's wife died in 2009. In 2009, Sean gave his son property that resulted in a taxable gift of $5,000,000 and upon which Sean paid $1,100,000 in transfer taxes. Sean had made no other taxable gifts during his life. Sean's will provided a charitable bequest of $750,000 to a museum of natural history. 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: 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- Applicable Exclusion Amount- Year 2008 Estates $780,800 Estates Unified Tax Credit- Gifts Applicable Exclusion Amount -Gifts $2,000,000 $345,800 $1,000,000 2009 $1,455,800 $3,500,000 $345,800 $1,000,000 2010 Estate tax repealed for $330,800 $1,000,000 2010 2011 $1,730,800 $5,000,000 $1,730,800 $5,000,000 2012 $1,772,800 $5,120,000 $1,772,800 $5,120,000 2013 $2,045,800 $5,250,000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 2014 $2,081,800 $5,340,000 $2,081,800 $5,340,000 2015 $2,117,800 $5,430,000 $2,117,800 $5,430,000 2016 $2,125,800 $5,340,000 $2,125,800 $5,340,000 2017 $2,141,800 $5,490,000 $2,141,800 $5,490,000 2018 $4,417,800 $11,180,000 $4,417,800 $11,180,000 Source: Internal Revenue Service. 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: Taxable Estate Value Tentative Tax More Than But Not More Than Base Amount + Percent On Excess Over $0 10,000 $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 1,000,000 248,300 39 750,000 1,000,000 345,800 40 40 1,000,000 Source: Internal Revenue Code, Section 2001. our Estate Use the following worksheet to calculate the federal estate tax due on Sean Caddell's estate. (Hint: Enter a value of $0 for any line that does not apply. Use Exhibit 15.7 to determine the appropriate unified tax credit. Use Exhibit 15.8 to calculate the tentative tax.) Computing Federal Estate Tax Due Name: Sean Line Computation Item Date: 11/30/2012 Amount Total Amount 1 Gross estate 2 Subtract sum of: (a) Funeral expenses $0.00 (b) Administrative expenses $0.00 (c) Debts $0.00 (d) Other expenses $0.00 Total: ($0.00) 3 Result: Adjusted gross estate $ 4 Subtract sum of: (a) Marital deduction $0.00 (b) Charitable deduction $ Total: $ 5 Result: Taxable estate $ 6 Add: Adjusted taxable gifts (post-1976) $ $ 7 Result: Estate tax base 8 Compute: Tentative tax on estate tax base $ 9 Subtract sum of: (a) Gift tax payable on post-1976 gifts $ (b) Unified tax credit $ $ Total: $ 10 Result: Total estate taxes ($0.00) 11 Subtract: Other credits $ 12 Result: Federal estate tax due