ESTATE TAX RETURN PROBLEM Clark Griswold is a wealthy engineer and inventor who retired to his residence in Fort Collins (Larimer County), Colorado Clark is married to Ellen and they have two adult children, Russell and Audrey Clark passed away on March 22 of this year at the age of 60, and his executor, Frank Shirley, has hired you to calculate the estate tax and prepare a draft of the 2016 estate tax return (pages 13) Clark's estate is being administered through the Larimer County Probate Court Frank has inventoried Clark's assets and has listed the value of his assets below The auto, residence, and checking account were owned jointly (with the right of survivorship) with his wife Clark also owned a whole life insurance policy with a cash surrender value of $50,000 Ellen and Clark's estate were listed as beneficiaries on the insurance policy with Ellen receiving $1 million and the estate receiving the remainder of the proceeds The Ajax common stock, the real estate, and the patent were all owned by Clark rather than joint ownership Frank also noted that the real estate is subject to an $800,000 mortgage At his death Clark also owed $1,500 on his credit card Clark's will instructs Frank to distribute Clark's property as follows Ellen inherits Clark's personal effects, Russell inherits the patent, and Audrey inherits 10,000 shares of the Ajax stock and the real estate The will also instructs Frank to distribute 20,000 shares of the Ajax stock to State University (an educational institution), and after paying Clark's personal debts, the residual of the estate (if any) is divided equally between Russell and Audrey The estate paid Clark's personal debts (credit card debt) and $4,300 of funeral expenses associated with Clark's burial Finally, the estate paid Frank $27,000 in executor's fees associated with the administration of Clark's estate Clark's tax records indicate that in 2007 Clark gave $500,000 of Ajax stock to Russell and $500,000 of cash to Audrey Clark filed a timely gift tax return (Form 709) and paid no gift taxes Property Value Adjusted Basis Auto Personal effects Checking account 30,000 shares of Ajax common stock Residence Life insurance Real estate Patent $ 20,000 75,000 250,000 1,200,000 6,800,000 4,000,000 3,500,000 4,225,000 $ 55,000 110,000 250,000 270,000 480,000 50,000 2,100,000 100,000

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ESTATE TAX RETURN PROBLEM Clark Griswold is a wealthy engineer and inventor who retired to his residence in Fort Collins (Larimer County), Colorado. Clark is

ESTATE TAX RETURN PROBLEM

Clark Griswold is a wealthy engineer and inventor who retired to his residence in Fort Collins (Larimer County), Colorado. Clark is married to Ellen and they have two adult children, Russell and Audrey. Clark passed away on March 22 of this year at the age of 60, and his executor, Frank Shirley, has hired you to calculate the estate tax and prepare a draft of the 2016 estate tax return (pages 13). Clark's estate is being administered through the Larimer County Probate Court.

Frank has inventoried Clark's assets and has listed the value of his assets below. The auto, residence, and checking account were owned jointly (with the right of survivorship) with his wife. Clark also owned a whole life insurance policy with a cash surrender value of $50,000. Ellen and Clark's estate were listed as beneficiaries on the insurance policy with Ellen receiving $1 million and the estate receiving the remainder of the proceeds. The Ajax common stock, the real estate, and the patent were all owned by Clark rather than joint ownership. Frank also noted that the real estate is subject to an $800,000 mortgage. At his death Clark also owed $1,500 on his credit card.

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Clark's will instructs Frank to distribute Clark's property as follows: Ellen inherits Clark's personal effects, Russell inherits the patent, and Audrey inherits 10,000 shares of the Ajax stock and the real estate. The will also instructs Frank to distribute 20,000 shares of the Ajax stock to State University (an educational institution), and after paying Clark's personal debts, the residual of the estate (if any) is divided equally between Russell and Audrey. The estate paid Clark's personal debts (credit card debt) and $4,300 of funeral expenses associated with Clark's burial. Finally, the estate paid Frank $27,000 in executor's fees associated with the administration of Clark's estate.

Clark's tax records indicate that in 2007 Clark gave $500,000 of Ajax stock to Russell and $500,000 of cash to Audrey. Clark filed a timely gift tax return (Form 709) and paid no gift taxes.

Property Value Adjusted Basis Auto Personal effects Checking account 30,000 shares of Ajax common stock Residence Life insurance Real estate Patent $ 20,000 75,000 250,000 1,200,000 6,800,000 4,000,000 3,500,000 4,225,000 $ 55,000 110,000 250,000 270,000 480,000 50,000 2,100,000 100,000