FEDERAL ESTATE CALCULATION -PROJECT#1

Alice Hoover died in the current year with an estate of $1,365,000. Her funeral expenses and administration expenses totaled $40,000. Her debts came to $160,000. All of her gross estate was in her probate estate, and her will left everything to her niece; except for a $265,000 life insurance policy that passed to her husband. Three years ago, she made taxable gifts of $500,000. Two years ago, she made taxable gifts of $800,000, and last year, she made taxable gifts of $700,000. Gift taxes of $435,000 were paid on those gifts. She made no other gifts. None of her taxable gifts was required to be included in her gross estate. Her estate was not entitled to any credit for tax on prior transfers, foreign death tax, or pre-1997 gift tax.

Using the worksheet below, calculate Alice's net federal estate tax:

1. Decedent's total gross estate $_________

Subtract deductions:

a. Funeral and administrative expenses $__________

b. Debts of decedent, mortgages, and liens $__________

Equals adjusted gross estate $__________

c. Marital deduction $__________

d. Charitable deduction $__________

Equals taxable estate $__________

3. Add adjusted taxable gifts $__________

Equals tax base $__________

4. Compute tentative tax using the transfer tax table:

a. Lower bracket amount $__________

b. Tax on lower bracket amount $__________

c. Excess over bracket amount $__________

d. Tax rate on excess % $__________

e. Tax on bracket excess amount $__________

Equals total tentative tax $__________

5. Subtract credits:

a. Gift taxes paid on post-1976 gifts $__________

b. Applicable exclusion amount $__________

c. State death tax credit $_________

d. Credit for taxes on pre-1977 gifts $__________

e. Foreign death tax credit

$__________

f. Credit for tax on prior transfers $__________

Equals net estate tax due

$__________

6. Add Additional transfer taxes due:

a. Generation-skipping transfer tax

$__________

Equals total transfer tax due $__________