Federal Estate Tax Calculation-Project #2

At his death, John Walker owned in his own name a house worth $250,000,

two cars worth a total of $42,000, common stock worth $400,000, and bank

accounts worth $300,000. He also held in joint ownership with his wife of

a summer cottage worth $80,000, bank accounts worth $200,000, and

bonds worth $150,000. He held in joint ownership with his daughter a

bank account worth $10,000, to which he had made all the contributions.

A year before his death, he made a gift of $10,000 in cash to his son.

John's wife also owned an insurance policy on his life, payable in the

amount of $300,000 at his death; she had applied for the policy herself and

always owned it. At John's death, he was receiving a pension that had a

survivorship benefit, payable to his wife, worth $400,000. He made no

gifts in his lifetime other than the $10,000 gift to his son. No community

property was involved.

What was the value of John Walker's gross estate at his death?

In addition to the information given above, assume John Walker left a will

giving his house to the University of Chicago and all the rest, residue, and

remainder of his property to his two children equally, with all debts,

expenses, and taxes payable from this residue. John left nothing to his wife

in his will, and she did not contest the will. John's debts came to a total of

$18,000. His funeral expenses were $6,000, and the expenses of

administering his estate were $25,000.

What are the deductions for John Walker's estate based on these additional

facts?

Using the worksheet, calculate John Walker's net federal estate tax

assuming he died in the current year. Assume there are no credits other than the

unified credit and the state death tax credit.

FEDERAL ESTATE CALCULATION WORKSHEET

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. Unified credit 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 $__________