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 $140,000 and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's 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.) Adjusted Basis Value roperty $ 30,e00 $ 65,e00 85,000 120,000 $ 27e,eee 27e,e00 $ 2,55e,eee $ 820,eee $1,450, 1,03e,e00 79,800 $10,175,e00 $ 2,850,ee0 80,000 Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust $ 1,05e,e00 $ $ 800,e00 $ 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 (For all requirements, enter your answers in dollars and not in millions of dollars.) a. Amount of estate tax b. Amount of estate tax C. Amount of estate tax EXHIBIT 25-1 Unified Transfer Tax Rates* Tax Base Equal to or Over Plus Tentative Tax 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 18% 20 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 1986 S 500.000 S 500,000 1987-1997 600.000 600.000 1998 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 5,000,000 5,120,000 5,250.000 5,340,000 5,430,000 5.450,000 1.000,000 1.500,000 2,000,000 3,500,000 5,000,000 5,120,000 5.250,000 5,340,000 5,430,000 5.450,000 5,490,000 2004-2005 2006-2008 2009-2010* 2011 2012 2013 2014 2015 2016 2017 2018 5.490.000 11,180,000 The applicable credit and exemption is zero for 11180.000 taxpayers who opt out of the estate tax in 2010 EXHIBIT 25-4 Discount Factors for Estimating the Value of Remainders Regulation Section 20.2031-7(d)(7) Table S.-Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 [Interest rate] Age 6.0% 0 06083 .0548304959 .04501 04101 03749.03441 03170 .02931 .02721 105668 .050490450704034 .03618 .03254 02934 .02652 .02403 .02183 2 05858 05222 04665 .0417803750.03373 .03042 .0275002492 02264 3 | .06072 | .05420 | .04848 | .04346 | .03904 | .03516 | .03173 | .02871 | .02603 | .02366 4 06303 .0563405046 04530 04075 .0367403319 .03006 .02729 .02483 5 06547 0586105258 04726 0425803844 03478 .03153 .02866.0261O 6 06805 .0610205482 04935 0445304026 03647 .0331203014 02749 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 35 19692.18423 17253 .16174 .15178 .1425813408 .12621 11892 .11217 36 .2040719119.17931.16833 15818148791400913204 12457 11764 37 .2114419838 18631 .17515.1648115523 .14635 .1381113046.12335 38 21904.20582 19357 .18222 .17170 .16193.15287 .14444 .13661 .12932 86 .79825.7904478278 .77524 .76783 .76055 .75340 .74636 .73944 .73264 87 80921.80176.79443 .78722 .78014.7731676630 .75956.75292 .74638 88 8197881268 80569.79880.79203 .78536 .7788077234 .76598 .75971 89 82994.8231781651 .80995.80349.79712 .79085.78467.778591 .77259 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 $140,000 and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's 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.) Adjusted Basis Value roperty $ 30,e00 $ 65,e00 85,000 120,000 $ 27e,eee 27e,e00 $ 2,55e,eee $ 820,eee $1,450, 1,03e,e00 79,800 $10,175,e00 $ 2,850,ee0 80,000 Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust $ 1,05e,e00 $ $ 800,e00 $ 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 (For all requirements, enter your answers in dollars and not in millions of dollars.) a. Amount of estate tax b. Amount of estate tax C. Amount of estate tax EXHIBIT 25-1 Unified Transfer Tax Rates* Tax Base Equal to or Over Plus Tentative Tax 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 18% 20 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 1986 S 500.000 S 500,000 1987-1997 600.000 600.000 1998 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 5,000,000 5,120,000 5,250.000 5,340,000 5,430,000 5.450,000 1.000,000 1.500,000 2,000,000 3,500,000 5,000,000 5,120,000 5.250,000 5,340,000 5,430,000 5.450,000 5,490,000 2004-2005 2006-2008 2009-2010* 2011 2012 2013 2014 2015 2016 2017 2018 5.490.000 11,180,000 The applicable credit and exemption is zero for 11180.000 taxpayers who opt out of the estate tax in 2010 EXHIBIT 25-4 Discount Factors for Estimating the Value of Remainders Regulation Section 20.2031-7(d)(7) Table S.-Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 [Interest rate] Age 6.0% 0 06083 .0548304959 .04501 04101 03749.03441 03170 .02931 .02721 105668 .050490450704034 .03618 .03254 02934 .02652 .02403 .02183 2 05858 05222 04665 .0417803750.03373 .03042 .0275002492 02264 3 | .06072 | .05420 | .04848 | .04346 | .03904 | .03516 | .03173 | .02871 | .02603 | .02366 4 06303 .0563405046 04530 04075 .0367403319 .03006 .02729 .02483 5 06547 0586105258 04726 0425803844 03478 .03153 .02866.0261O 6 06805 .0610205482 04935 0445304026 03647 .0331203014 02749 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 35 19692.18423 17253 .16174 .15178 .1425813408 .12621 11892 .11217 36 .2040719119.17931.16833 15818148791400913204 12457 11764 37 .2114419838 18631 .17515.1648115523 .14635 .1381113046.12335 38 21904.20582 19357 .18222 .17170 .16193.15287 .14444 .13661 .12932 86 .79825.7904478278 .77524 .76783 .76055 .75340 .74636 .73944 .73264 87 80921.80176.79443 .78722 .78014.7731676630 .75956.75292 .74638 88 8197881268 80569.79880.79203 .78536 .7788077234 .76598 .75971 89 82994.8231781651 .80995.80349.79712 .79085.78467.778591 .77259