Calculate the amount of the estate tax due , assuming Montgomery dies this year and has never made any taxable gifts.

Comprehensive Problem 25-68 (LO 25-1, LO 25-2, LO 25-3, LO 25-4) Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $128,000 and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old and the 7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2 andExhibit 25-4;) Adjusted Basis Property Value 24,000 $ 59,000 Auto Personal effects $ 79,000 $ 114,000 258,000 $ 258,000 $ 2,520,000 $ 790,000 $ 1,420,000 $1,000,000 $ 1,020,000 $ $10,145,000 $2,820,000 800,000 $ Checking and savings accounts Investments Residence Life insurance proceeds 58,000 Real estate investments Walen Trust 80,000 Required: a. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts. b. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $1 million, and Montgomery used his 2006 applicable credit to avoid paying any gift tax. c. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $5 million, and Montgomery used his $1 million 2006 applicable credit to reduce the gift tax in 2006. Montgomery plans to bequeath his investments to charity and leave his remaining assets to his surviving relatives. (For all requirements, enter your answers in dollars and not in millions of dollars.) a. Amount of estate tax b. Amount of estate tax c. Amount of estate tax EXHIBIT 25-1 Unified Transfer Tax Rates* Tax Base Not Over Equal to or Over Tentative Tax Plus of Amount Over 10,000 18% 10,000 10,000 20,000 20 1,800 20,000 40,000 3,800 22 20,000 40,000 40,000 60,000 8,200 24 26 13,000 60,000 80,000 60,000 80,000 100,000 18,200 28 80,000 150,000 23,800 30 100,000 100,000 32 150,000 250,000 38,800 150,000 70,800 250,000 250,000 500,000 34 750,000 500,000 37 155,800 500,000 750,000 39 1,000,000 248,300 750,000 1,000,000 345,800 40 1,000,000 *The applicable credit and exemption Is zero for estates that opted out of the estate tax In 2010. EXHIBIT 25-2 The Exemption Equivalent Year of Transfer Gift Tax Estate Tax 2$ 2$ 1986 500,000 500,000 19871997 600,000 600,000 625,000 1998 625,000 1999 650,000 650,000 20002001 675,000 675,000 20022003 1,000,000 1,000,000 20042005 1,000,000 1,500,000 20062008 2,000,000 1,000,000 20092010* 3,500,000 1,000,000 2011 5,000,000 5,000,000 2012 5,120,000 5,120,000 2013 5,250,000 5,250,000 5,340,000 2014 5,340,000 5,430,000 2015 5,430,000 5,450,000 2016 5,450,000 2017 5,490,000 5,490,000 2018 11,180,000 11,180,000 *The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010. EXHIBIT 25-4 Discount Factors for Estimating the Value of Remainders Regulation Section 20.2031-7(d)(7) Table S.-Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 [Interest rate] Age 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0% .03170.02931 .04501 .03749 .06083 .05483 .04959 .04101 .03441 .02721 .04507 .02403 .05668 .05049 .04034 .03618 .03254 .02934 .02652 .02183 .03373 2 .05858 .05222 .04665 .04178 .03750 .03042 .02750 .02492 .02264 .02603 3 .06072 .05420 .04848 .04346 .03904 .03516 .03173 .02871 .02366 4 .06303 .05634 .05046 .04530 .04075 .03674 .03319 .03006 .02729 .02483 .03153 .02866 .03312 .03014 .04726 .06547 .05861 .05258 .04258 .03844 .03478 .02610 .06805 .06102 .05482 .04935 .04453 .04026 .03647 .02749 .11892 .11217 35 .19692 .18423 .17253 .16174 .15178 .14258 .13408 .12621 .13204 .12457 .17931 36 .20407 .19119 .16833 .15818 .14879 .14009 .11764 37 .21144 .19838 .18631 .17515 .16481 .15523 .14635 .13046 .12335 .13811 .21904 .14444.13661 38 .20582 .19357 .18222 .17170 .16193 .15287 .12932 .76783 .74636 .78278 .77524 .73264 86 .79825 .79044 .76055 .75340 .73944 .75292 .80176 .79443 .78014 .76630 87 .80921 .78722 .77316 .75956 .74638 .77234 .76598 .78536 88 .81978 .80569 .79880 .79203 .77880 .75971 .81268 .78467 89 .82994 .82317 .81651 .80995 .80349 .79712 .79085 .77859 .77259 Comprehensive Problem 25-68 (LO 25-1, LO 25-2, LO 25-3, LO 25-4) Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $128,000 and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old and the 7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2 andExhibit 25-4;) Adjusted Basis Property Value 24,000 $ 59,000 Auto Personal effects $ 79,000 $ 114,000 258,000 $ 258,000 $ 2,520,000 $ 790,000 $ 1,420,000 $1,000,000 $ 1,020,000 $ $10,145,000 $2,820,000 800,000 $ Checking and savings accounts Investments Residence Life insurance proceeds 58,000 Real estate investments Walen Trust 80,000 Required: a. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts. b. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $1 million, and Montgomery used his 2006 applicable credit to avoid paying any gift tax. c. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $5 million, and Montgomery used his $1 million 2006 applicable credit to reduce the gift tax in 2006. Montgomery plans to bequeath his investments to charity and leave his remaining assets to his surviving relatives. (For all requirements, enter your answers in dollars and not in millions of dollars.) a. Amount of estate tax b. Amount of estate tax c. Amount of estate tax EXHIBIT 25-1 Unified Transfer Tax Rates* Tax Base Not Over Equal to or Over Tentative Tax Plus of Amount Over 10,000 18% 10,000 10,000 20,000 20 1,800 20,000 40,000 3,800 22 20,000 40,000 40,000 60,000 8,200 24 26 13,000 60,000 80,000 60,000 80,000 100,000 18,200 28 80,000 150,000 23,800 30 100,000 100,000 32 150,000 250,000 38,800 150,000 70,800 250,000 250,000 500,000 34 750,000 500,000 37 155,800 500,000 750,000 39 1,000,000 248,300 750,000 1,000,000 345,800 40 1,000,000 *The applicable credit and exemption Is zero for estates that opted out of the estate tax In 2010. EXHIBIT 25-2 The Exemption Equivalent Year of Transfer Gift Tax Estate Tax 2$ 2$ 1986 500,000 500,000 19871997 600,000 600,000 625,000 1998 625,000 1999 650,000 650,000 20002001 675,000 675,000 20022003 1,000,000 1,000,000 20042005 1,000,000 1,500,000 20062008 2,000,000 1,000,000 20092010* 3,500,000 1,000,000 2011 5,000,000 5,000,000 2012 5,120,000 5,120,000 2013 5,250,000 5,250,000 5,340,000 2014 5,340,000 5,430,000 2015 5,430,000 5,450,000 2016 5,450,000 2017 5,490,000 5,490,000 2018 11,180,000 11,180,000 *The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010. EXHIBIT 25-4 Discount Factors for Estimating the Value of Remainders Regulation Section 20.2031-7(d)(7) Table S.-Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 [Interest rate] Age 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0% .03170.02931 .04501 .03749 .06083 .05483 .04959 .04101 .03441 .02721 .04507 .02403 .05668 .05049 .04034 .03618 .03254 .02934 .02652 .02183 .03373 2 .05858 .05222 .04665 .04178 .03750 .03042 .02750 .02492 .02264 .02603 3 .06072 .05420 .04848 .04346 .03904 .03516 .03173 .02871 .02366 4 .06303 .05634 .05046 .04530 .04075 .03674 .03319 .03006 .02729 .02483 .03153 .02866 .03312 .03014 .04726 .06547 .05861 .05258 .04258 .03844 .03478 .02610 .06805 .06102 .05482 .04935 .04453 .04026 .03647 .02749 .11892 .11217 35 .19692 .18423 .17253 .16174 .15178 .14258 .13408 .12621 .13204 .12457 .17931 36 .20407 .19119 .16833 .15818 .14879 .14009 .11764 37 .21144 .19838 .18631 .17515 .16481 .15523 .14635 .13046 .12335 .13811 .21904 .14444.13661 38 .20582 .19357 .18222 .17170 .16193 .15287 .12932 .76783 .74636 .78278 .77524 .73264 86 .79825 .79044 .76055 .75340 .73944 .75292 .80176 .79443 .78014 .76630 87 .80921 .78722 .77316 .75956 .74638 .77234 .76598 .78536 88 .81978 .80569 .79880 .79203 .77880 .75971 .81268 .78467 89 .82994 .82317 .81651 .80995 .80349 .79712 .79085 .77859 .77259