This year Nathan transferred $7 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next five years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit?  Multiple Choice  $120,000  $345,800  $520,000  zero—there is a $11.7 million exemption equivalent.  None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule.

SWFT Corp Partner Estates Trusts
42nd Edition
ISBN:9780357161548
Author:Raabe
Publisher:Raabe
Chapter19: Family Tax Planning
Section: Chapter Questions
Problem 16CE
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This year Nathan transferred $7 million to an irrevocable trust established for the benefit of his nephew. The trustee is directed to accumulate income for the next five years before distributing the trust corpus to Nathan's nephew. In past years Nathan has made taxable gifts of $6 million and used an applicable credit on an exemption equivalent of $5 million. What amount of gift tax, if any, must Nathan remit? 

Multiple Choice 

$120,000 

$345,800 

$520,000 

zero—there is a $11.7 million exemption equivalent. 

None of the choices are correct. The amount of tax cannot be estimated without the use of a tax rate schedule.

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