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 $156,000, 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	$	38,000	$	73,000
Personal effects		93,000		128,000
Checking and savings accounts		286,000		286,000
Investments		2,590,000		860,000
Residence		1,490,000		1,070,000
Life insurance proceeds		1,090,000		86,000
Real estate investments		10,215,000		2,890,000
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.)

a. amount of estate tax b. amount of estate tax c. amount of estate tax

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%	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	.78467	.77859	.77259

Source: Reg. 20.2031-7(d)(7) Table S.