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 $120,000, 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 ) Property Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust Value $ 20,000 75,000 250,000 2,500,000 1,400,000 1,000,000 10,125,000 800,000 Adjusted Basis $ 55,000 110,000 250,000 770,000 980,000 50,000 2,800,000 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 (For all requirements, enter your answers in dollars and not in millions of dollars ) Amount of estate tax Amount of estate tax Amount of estate tax EXHIBIT 25 1 Unified Transfer Tax Rates Tax Base Equal to or Over $ 0 10,000 20,000 40,000 60,000 80,000 Not Over $10,000 20,000 40,000 Plus 18 20 22 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 of Amount Over $ 0 10,000 20,000 40,000 60,000 80,000 100,000 26 28 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 100,000 32 150,000 250,000 150,000 250,000 500,000 37 500,000 750,000 39 750,000 1,000,000 1,000,000 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 1987 1997 1998 $500,000 600,000 625,000 650,000 675,000 1,000,000 1999 2000 2001 2002 2003 20042005 1,000,000 20062008 1,000,000 $500,000 600,000 625,000 650,000 675,000 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 2009 2010 2011 2012 2013 2014 1,000,000 5,000,000 5,120,000 5,250,000 5,340,000 5,430,000 5,450,000 5,490,000 11,180,000 11,400,000 2015 2016 2017 5,490,000 2018 11,180,000 11,400,000 2019 The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010 EXHIBIT 25 4 Discount Factors for Estimating the Value of Remainders 6 0 02721 02183 02264 02366 02483 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 Age 0 06083 05483 04959 04501 04101 03749 03441 03170 02931 Age 1 05668 05049 04507 04034 03618 03254 02934 02652 02403 Age 2 05858 05222 04665 0 4178 0 3750 03373 03042 0 2750 02492 Age 3 06072 05420 04848 04346 03904 03516 03173 02871 02603 Age 4 06303 05634 05046 04530 04075 03674 03319 03006 02729 Age 5 06547 05861 05258 04726 04258 03844 03478 03153 02866 Age 6 06805 06102 05482 04935 04453 04026 03647 03312 03014 Age 35 19692 18423 17253 16174 15178 14258 13408 12621 11892 Age 36 20407 19119 17931 16833 15818 14879 14009 13204 12457 Age 37 21144 19838 18631 17515 16481 15523 14635 13811 13046 Age 38 21904 20582 19357 18222 17170 16193 15287 14444 13661 Age 86 79825 79044 78278 77524 76783 76055 75340 74636 73944 Age 87 80921 80176 79443 78722 78014 77316 76630 75956 75292 Age 88 81978 81268 80569 79880 79203 78536 77880 77234 76598 Age 89 82317 8 1651 80995 80349 79712 790857846777859 7839 Source Reg $ 20 2031 7(d)(7) Table S Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 02610 02749 11217 11764 12335 12932 1 73264 74638 75971 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 $120,000, 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 ) Property Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust Value $ 20,000 75,000 250,000 2,500,000 1,400,000 1,000,000 10,125,000 800,000 Adjusted Basis $ 55,000 110,000 250,000 770,000 980,000 50,000 2,800,000 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 (For all requirements, enter your answers in dollars and not in millions of dollars ) Amount of estate tax Amount of estate tax Amount of estate tax EXHIBIT 25 1 Unified Transfer Tax Rates Tax Base Equal to or Over $ 0 10,000 20,000 40,000 60,000 80,000 Not Over $10,000 20,000 40,000 Plus 18 20 22 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 of Amount Over $ 0 10,000 20,000 40,000 60,000 80,000 100,000 26 28 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 100,000 32 150,000 250,000 150,000 250,000 500,000 37 500,000 750,000 39 750,000 1,000,000 1,000,000 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 1987 1997 1998 $500,000 600,000 625,000 650,000 675,000 1,000,000 1999 2000 2001 2002 2003 20042005 1,000,000 20062008 1,000,000 $500,000 600,000 625,000 650,000 675,000 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 2009 2010 2011 2012 2013 2014 1,000,000 5,000,000 5,120,000 5,250,000 5,340,000 5,430,000 5,450,000 5,490,000 11,180,000 11,400,000 2015 2016 2017 5,490,000 2018 11,180,000 11,400,000 2019 The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010 EXHIBIT 25 4 Discount Factors for Estimating the Value of Remainders 6 0 02721 02183 02264 02366 02483 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 Age 0 06083 05483 04959 04501 04101 03749 03441 03170 02931 Age 1 05668 05049 04507 04034 03618 03254 02934 02652 02403 Age 2 05858 05222 04665 0 4178 0 3750 03373 03042 0 2750 02492 Age 3 06072 05420 04848 04346 03904 03516 03173 02871 02603 Age 4 06303 05634 05046 04530 04075 03674 03319 03006 02729 Age 5 06547 05861 05258 04726 04258 03844 03478 03153 02866 Age 6 06805 06102 05482 04935 04453 04026 03647 03312 03014 Age 35 19692 18423 17253 16174 15178 14258 13408 12621 11892 Age 36 20407 19119 17931 16833 15818 14879 14009 13204 12457 Age 37 21144 19838 18631 17515 16481 15523 14635 13811 13046 Age 38 21904 20582 19357 18222 17170 16193 15287 14444 13661 Age 86 79825 79044 78278 77524 76783 76055 75340 74636 73944 Age 87 80921 80176 79443 78722 78014 77316 76630 75956 75292 Age 88 81978 81268 80569 79880 79203 78536 77880 77234 76598 Age 89 82317 8 1651 80995 80349 79712 790857846777859 7839 Source Reg $ 20 2031 7(d)(7) Table S Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 02610 02749 11217 11764 12335 12932 1 73264 74638 75971 77259

Question

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 $120,000, 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 ) Property Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust Value $ 20,000 75,000 250,000 2,500,000 1,400,000 1,000,000 10,125,000 800,000 Adjusted Basis $ 55,000 110,000 250,000 770,000 980,000 50,000 2,800,000 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 (For all requirements, enter your answers in dollars and not in millions of dollars ) Amount of estate tax Amount of estate tax Amount of estate tax EXHIBIT 25 1 Unified Transfer Tax Rates  Tax Base Equal to or Over $ 0 10,000 20,000 40,000 60,000 80,000 Not Over $10,000 20,000 40,000 Plus 18  20 22 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 of Amount Over $ 0 10,000 20,000 40,000 60,000 80,000 100,000 26 28 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 100,000 32 150,000 250,000 150,000 250,000 500,000 37 500,000 750,000 39 750,000 1,000,000 1,000,000 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 1987 1997 1998 $500,000 600,000 625,000 650,000 675,000 1,000,000 1999 2000 2001 2002 2003 20042005 1,000,000 20062008 1,000,000 $500,000 600,000 625,000 650,000 675,000 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 2009 2010  2011 2012 2013 2014 1,000,000 5,000,000 5,120,000 5,250,000 5,340,000 5,430,000 5,450,000 5,490,000 11,180,000 11,400,000 2015 2016 2017 5,490,000 2018 11,180,000 11,400,000 2019  The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010  EXHIBIT 25 4 Discount Factors for Estimating the Value of Remainders 6 0   02721  02183 02264  02366  02483 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  Age 0  06083  05483  04959  04501  04101  03749 03441  03170  02931 Age 1  05668  05049  04507  04034  03618  03254  02934  02652  02403 Age 2  05858  05222  04665 0 4178 0 3750  03373 03042 0 2750  02492 Age 3  06072  05420  04848  04346  03904  03516  03173  02871  02603 Age 4  06303  05634  05046  04530  04075  03674  03319  03006  02729 Age 5  06547  05861  05258  04726  04258  03844 03478  03153  02866 Age 6  06805  06102  05482  04935 04453  04026  03647  03312  03014 Age 35  19692  18423  17253  16174  15178  14258  13408  12621  11892 Age 36 20407  19119  17931  16833  15818  14879  14009  13204  12457 Age 37  21144  19838  18631  17515  16481  15523  14635  13811  13046 Age 38  21904 20582  19357  18222  17170  16193  15287  14444  13661 Age 86  79825  79044  78278  77524  76783 76055  75340 74636    73944 Age 87  80921 80176 79443 78722 78014 77316 76630  75956 75292 Age 88  81978  81268  80569  79880  79203  78536  77880  77234 76598 Age 89  82317 8 1651  80995  80349  79712  790857846777859     7839 Source  Reg  $ 20 2031 7(d)(7) Table S  Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009   02610  02749  11217  11764  12335  12932 1  73264 74638  75971 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 $120,000, 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 ) Property Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust Value $ 20,000 75,000 250,000 2,500,000 1,400,000 1,000,000 10,125,000 800,000 Adjusted Basis $ 55,000 110,000 250,000 770,000 980,000 50,000 2,800,000 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 (For all requirements, enter your answers in dollars and not in millions of dollars ) Amount of estate tax Amount of estate tax Amount of estate tax EXHIBIT 25 1 Unified Transfer Tax Rates  Tax Base Equal to or Over $ 0 10,000 20,000 40,000 60,000 80,000 Not Over $10,000 20,000 40,000 Plus 18  20 22 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 of Amount Over $ 0 10,000 20,000 40,000 60,000 80,000 100,000 26 28 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 100,000 32 150,000 250,000 150,000 250,000 500,000 37 500,000 750,000 39 750,000 1,000,000 1,000,000 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 1987 1997 1998 $500,000 600,000 625,000 650,000 675,000 1,000,000 1999 2000 2001 2002 2003 20042005 1,000,000 20062008 1,000,000 $500,000 600,000 625,000 650,000 675,000 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 2009 2010  2011 2012 2013 2014 1,000,000 5,000,000 5,120,000 5,250,000 5,340,000 5,430,000 5,450,000 5,490,000 11,180,000 11,400,000 2015 2016 2017 5,490,000 2018 11,180,000 11,400,000 2019  The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010  EXHIBIT 25 4 Discount Factors for Estimating the Value of Remainders 6 0   02721  02183 02264  02366  02483 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  Age 0  06083  05483  04959  04501  04101  03749 03441  03170  02931 Age 1  05668  05049  04507  04034  03618  03254  02934  02652  02403 Age 2  05858  05222  04665 0 4178 0 3750  03373 03042 0 2750  02492 Age 3  06072  05420  04848  04346  03904  03516  03173  02871  02603 Age 4  06303  05634  05046  04530  04075  03674  03319  03006  02729 Age 5  06547  05861  05258  04726  04258  03844 03478  03153  02866 Age 6  06805  06102  05482  04935 04453  04026  03647  03312  03014 Age 35  19692  18423  17253  16174  15178  14258  13408  12621  11892 Age 36 20407  19119  17931  16833  15818  14879  14009  13204  12457 Age 37  21144  19838  18631  17515  16481  15523  14635  13811  13046 Age 38  21904 20582  19357  18222  17170  16193  15287  14444  13661 Age 86  79825  79044  78278  77524  76783 76055  75340 74636    73944 Age 87  80921 80176 79443 78722 78014 77316 76630  75956 75292 Age 88  81978  81268  80569  79880  79203  78536  77880  77234 76598 Age 89  82317 8 1651  80995  80349  79712  790857846777859     7839 Source  Reg  $ 20 2031 7(d)(7) Table S  Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009   02610  02749  11217  11764  12335  12932 1  73264 74638  75971 77259

Accepted Answer

The Answer is in the image, click to view ...

Question

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

Step by Step Solution

Step: 1

Get Instant Access with AI-Powered Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Recommended Textbook for

Financial Accounting and Reporting a Global Perspective

Students also viewed these Accounting questions

Question

Question

Question

Question

Question

Question

Question

Question

Question