Jack is single and he made his first taxable gift of $1,000,000 in 2008. Jack made additional gifts in 2009, at which time he gave $1,778,000 to each of his three children and an additional $1,000,000 to State University (a charity). The annual exclusion in 2009 was $13,000. Recently Jack has been in poor health and would like you to estimate his estate tax should he die this year. Jack estimates his taxable estate (after deductions) will be worth $10.54 million at his death. (Refer to Exhibit 25-1 and Exhibit 25-2.)

What is the Estate Tax?

EXHIBIT 25-1 Unified Transfer Tax Rates* Tax Base Equal to or Over Tentative Tax Plus 18% 20 Not Over of Amount Over $10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 0 1,800 3,800 8,200 13,000 18,200 23,800 38,800 70,800 155,800 248,300 345,800 0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 24 26 28 30 32 34 37 39 40 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 500.000 600.000 1986 1987-1997 1998 S 500,000 600.000 625.000 650,000 675.000 625.000 650.000 675.000 1999 2000-2001 2002-2003 1.000.000 1.000,000 1.000,000 1.000.000 1,500.000 2,000,000 2004-2005 2006-2008 2009-2010 3,500,000 5.000.000 5,120,000 5,250,000 5,340,000 5,430.000 1.000.000 5.000,000 5,120,000 5,250,000 5,340,000 5,430,000 5.450.000 5,490,000 2011 2012 2013 2014 2015 5.450.000 5,490,000 1.1S0,000 2016 2017 2018 1.180,000