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 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.)

			Adjusted
Property	Value		Basis
Auto	$	30,000	$	65,000
Personal effects		85,000		120,000
Checking and savings accounts		270,000		270,000
Investments		2,550,000		820,000
Residence		1,450,000		1,030,000
Life insurance proceeds		1,050,000		70,000
Real estate investments		10,175,000		2,850,000
Walen Trust		800,000		80,000

Required:

1. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts.
2. 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.
3. 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.)

Plus 18% 20 22 EXHIBIT 25-1 Unified Transfer Tax Rates* Tax Base Equal to or Over Not Over $ 0 $10,000 10,000 20,000 20,000 40,000 40,000 60,000 60,000 80,000 80,000 100,000 100,000 150,000 150,000 250,000 250,000 500,000 500,000 750,000 750,000 1,000,000 1,000,000 Tentative Tax $ 0 1,800 3,800 8,200 13,000 18,200 23,800 38,800 70,800 155,800 248,300 345,800 24 26 28 of Amount Over $ 0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 30 32 34 37 39 40 *The applicable credit and exemption are 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 $500,000 $500,000 19871997 600,000 600,000 1998 625,000 625,000 1999 650,000 650,000 2000-2001 675,000 675,000 2002-2003 1,000,000 1,000,000 2004-2005 1,000,000 1,500,000 2006-2008 1,000,000 2,000,000 2009-2010* 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 *The applicable credit and exemption are zero for taxpayers who opt out of the estate tax in 2010. 5.8% 6.0% .02931 .02721 .02403 .02183 .02264 .02492 .02603 .02366 .04075 .02729 .02483 EXHIBIT 25-4 Discount Factors for Estimating the Value of Remainders Regulation $ 20.2031-7(d)(7) Table S.-Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 [Interest rate] 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% Age 0 .06083 .05483 .04959 .04501 .04101 .03749 .03441 .03170 Age 1 .05668 .05049 .04507 .04034 .03618 .03254 .02934 02652 Age 2 .05858 .05222 ,04665 .04178 .03750 ,03373 .03042 .02750 Age 3 .06072 .05420 .04848 .04346 .03904 .03516 .03173 .02871 Age 4 .06303 .05634 .05046 .04530 .03674 .03319 .03006 Age 5 .06547 .05258 .04726 .04258 .03844 .03478 .03153 Age 6 .06805 .06102 .05482 .04935 .04453 .04026 .03647 .03312 Age 35 .19692 .18423 .17253 .16174 .15178 .14258 .13408 .12621 Age 36 .20407 .19119 .17931 .16833 .15818 .14879 .14009 .13204 Age 37 .21144 .19838 .18631 .17515 .16481 .15523 .14635 .13811 Age 38 .21904 .20582 .19357 .18222 .17170 .16193 .15287 .14444 Age 86 .79825 .79044 .78278 .77524 .76783 .76055 .75340 .74636 Age 87 .80921 .80176 .79443 .78722 .78014 .77316 .76630 .75956 Age 88 .81978 .81268 .80569 .79880 .79203 .78536 .77880 .77234 Age 89 .82994 .82317 .81651 .80995 .80349 .79712 .79085 .78467 ,05861 .02866 .02610 .03014 .02749 .11892 .11217 .12457 .13046 .11764 .12335 .13661 .12932 .73944 .75292 .73264 .74638 .75971 .76598 .77859 .77259 Source: Reg. $ 20.2031-7(d)(7) Table S