68. 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.

Property Value Adjusted Basis Auto $ 20,000 $ 55,000 Personal effects 75,000 110,000 Checking and savings accounts 250,000 250,000 Investments 2,500,000 770,000 Residence 1,400,000 980,000 Life insurance proceeds 1,000,000 50,000 Real estate investments 10,125,000 2,800,000 Walen Trust 800,000 80,000

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.