When Jacob Kohler died unmarried in 2015, he left an estate valued at $7,900,000. His trust directed distribution as follows: $20,000 to the local hospital, $170,000 to his alma mater, and the remainder to his three adult children. Death-related costs and expenses were $15,800 for funeral expenses, $50,000 paid to attorneys, $3,500 paid to accountants, and $35,000 paid to the trustee of his living trust. In addition, there were debts of $80,000. Use Exhibit 15.7 and Exhibit 15.8 to calculate the federal estate tax due on his estate. Round your answer to the nearest whole dollar.
When Jacob Kohler died unmarried in 2015, he left an estate valued at $7,900,000. His trust directed distribution as follows: $20,000 to the local hospital, $170,000 to his alma mater, and the remainder to his three adult children. Death-related costs and expenses were $15,800 for funeral expenses, $50,000 paid to attorneys, $3,500 paid to accountants, and $35,000 paid to the trustee of his living trust. In addition, there were debts of $80,000. Use Exhibit 15.7 and Exhibit 15.8 to calculate the federal estate tax due on his estate. Round your answer to the nearest whole dollar.
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Chapter15: Preserving Your Estate
Section: Chapter Questions
Problem 9FPE
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When Jacob Kohler died unmarried in 2015, he left an estate valued at $7,900,000. His trust directed distribution as follows: $20,000 to the local hospital, $170,000 to his alma mater, and the remainder to his three adult children. Death-related costs and expenses were $15,800 for funeral expenses, $50,000 paid to attorneys, $3,500 paid to accountants, and $35,000 paid to the trustee of his living trust. In addition, there were debts of $80,000. Use Exhibit 15.7 and Exhibit 15.8 to calculate the federal estate tax due on his estate. Round your answer to the nearest whole dollar.
Transcribed Image Text:EXHIBIT 15.7 Federal Unified Transfer Tax Rates
This unified rate schedule defines the amount of federal gift and estate taxes that estates of various sizes would have
to pay. It incorporates the rates passed in the American Taxpayer Relief Act of 2012, signed into law in 2013. Estates and
gifts under the exclusion amount pay no federal tax. The estate exclusion amount increased annually from $2,000,000 in
2006 to $5,430,000 in 2015 (see Exhibit 15.8). From 2009 to 2015, the top tax rates decreased from 45% to 40%.
TAXABLE ESTATE VALUE
TENTATIVE TAX
But Not More Than
On Excess Over
More Than
Base Amount
+ Percent
$ 10,000
$ 0
18%
10,000
20,000
1,800
20%
$ 10,000
20,000
40,000
3,800
22
20,000
40,000
60,000
8,200
24
40,000
60,000
80,000
13,000
26
60,000
80,000
100,000
18,200
28
80,000
100,000
150,000
23,800
30
100,000
150,000
250,000
38,800
32
150,000
250,000
500,000
70,800
34
250,000
500,000
750,000
155,800
37
500,000
750,000
1,000,000
248,300
39
750,000
1,000,000
345,800
40
1,000,000
Source: Intornal Revonue Codo, Section 2001
Transcribed Image Text:EXHIBIT 15.8
Unified Credits and Applicable Exclusion Amounts for Estates and Gifts
On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was
signed into law. The major features of the transfer tax provisions were to reinstate the transfer tax on estates, change the
applicable exclusion amount for both gift transfers and estate transfers, and add the portability of the unified transfer tax
credit. This table shows the recent history of the applicable exclusion amounts.
Year
Unified Tax
Credit-Estates
Applicable Exclusion
Amount-Estates
Unified Tax
Credit-Gifts
Applicable Exclusion
Amount-Gifts
2006
$780,800
$2,000,000
$345,800
$1,000,000
2007
$790,800
$2,000,000
$345,800
$1,000,000
2008
$780,800
$2,000,000
$345,800
$1,000,000
2009
$1,455,800
$3,500,000
$345,800
$1,000,000
2010
Estate tax repealed for 2010
$330,800
$1,000,000
$1,730,800
$5,000,000
$1,730,800
$5,000,000
$5, 120,000
$5,250,000
$5,340,000
2011
2012
$1,772,800
$5,120,000
$1,772,800
2013
$2,045,800
$5,250,000
$2,045,800
2014
$2,081,800
$5,340,000
$2,081,800
2015
$2,117,800
$5,430,000
$2,117,800
$5,430,000
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