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 $154,000, and the proceeds are payable to Montgomerys estate. The Walen Trust is an irrevocable trust created by Montgomerys brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomerys 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 and Exhibit 25-4.)

Property	Value	Adjusted Basis
Auto	$ 37,000	$ 72,000
Personal effects	92,000	127,000
Checking and savings accounts	284,000	284,000
Investments	2,585,000	855,000
Residence	1,485,000	1,065,000
Life insurance proceeds	1,085,000	84,000
Real estate investments	10,210,000	2,885,000
Walen Trust	800,000	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.

Regulation 20.2031-7(d)(7) Table S.Based on Life Table 2000CM Single Life Remainder Factors Applicable on or after May 1, 2009 [Interest rate]
	4.2%	4.4%	4.6%	4.8%	5.0%	5.2%	5.4%	5.6%	5.8%	6.0%
Age 0	.06083	.05483	.04959	.04501	.04101	.03749	.03441	.03170	.02931	.02721
Age 1	.05668	.05049	.04507	.04034	.03618	.03254	.02934	.02652	.02403	.02183
Age 2	.05858	.05222	.04665	.04178	.03750	.03373	.03042	.02750	.02492	.02264
Age 3	.06072	.05420	.04848	.04346	.03904	.03516	.03173	.02871	.02603	.02366
Age 4	.06303	.05634	.05046	.04530	.04075	.03674	.03319	.03006	.02729	.02483
Age 5	.06547	.05861	.05258	.04726	.04258	.03844	.03478	.03153	.02866	.02610
Age 6	.06805	.06102	.05482	.04935	.04453	.04026	.03647	.03312	.03014	.02749
Age 35	.19692	.18423	.17253	.16174	.15178	.14258	.13408	.12621	.11892	.11217
Age 36	.20407	.19119	.17931	.16833	.15818	.14879	.14009	.13204	.12457	.11764
Age 37	.21144	.19838	.18631	.17515	.16481	.15523	.14635	.13811	.13046	.12335
Age 38	.21904	.20582	.19357	.18222	.17170	.16193	.15287	.14444	.13661	.12932
Age 86	.79825	.79044	.78278	.77524	.76783	.76055	.75340	.74636	.73944	.73264
Age 87	.80921	.80176	.79443	.78722	.78014	.77316	.76630	.75956	.75292	.74638
Age 88	.81978	.81268	.80569	.79880	.79203	.78536	.77880	.77234	.76598	.75971
Age 89	.82994	.82317	.81651	.80995	.80349	.79712	.79085

Year of Transfer	Gift Tax	Estate Tax
1986	$500,000	$500,000
19871997	600,000	600,000
1998	625,000	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	1,000,000	2,000,000
20092010*	1,000,000	3,500,000
2011	5,000,000	5,000,000
2012	5,120,000	5,120,000
2013	5,250,000	5,250,000
2014	5,340,000	5,340,000
2015	5,430,000	5,430,000
2016	5,450,000	5,450,000
2017	5,490,000	5,490,000
2018	11,180,000	11,180,000
2019	11,400,000	11,400,000
2020	11,580,000	11,580,000
2021	11,700,000	11,700,000

Tax Base Equal to or Over	Not Over	Tentative Tax	Plus	of Amount Over
$ 0	$10,000	$ 0	18%	$ 0
10,000	20,000	1,800	20	10,000
20,000	40,000	3,800	22	20,000
40,000	60,000	8,200	24	40,000
60,000	80,000	13,000	26	60,000
80,000	100,000	18,200	28	80,000
100,000	150,000	23,800	30	100,000
150,000	250,000	38,800	32	150,000
250,000	500,000	70,800	34	250,000
500,000	750,000	155,800	37	500,000
750,000	1,000,000	248,300	39	750,000
1,000,000		345,800	40	1,000,000