Step 4: Determine tentative tax for taxable gifts made in the current year
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Computing Gift Tax and Tax Liability, cont’d
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Donee’s Basis and Holding Period for Gifts
Basis
:
The donee’s basis for a gift depends upon
whether the donee will realize gain or loss on the
disposition of the gift
Gain Basis:
Generally, carryover basis (i.e., donor’s basis)
adjusted for gift tax attributable to the appreciation of the asset.
Loss Basis:
The lower of the gain basis or the fair market value
of the property on the date of the gift.
Holding Period
If gain basis used, donor’s holding period tacks
If loss basis used, no tacking (holding period starts on date of
gift)
Basis computations are more complicated than
presented here.
We will go over this in more detail in
future classes.
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Estate Taxes
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Estate Taxes Formula
Formula For Gift & Estate Taxes:
The 2013 Gift Tax Credit is $2,045,800 ($5.250 million of taxable gifts)
The 2013 Estate Tax Credit is the same
Gift tax
Estate tax
Total gifts to which the gift tax might apply (at fair value)
– Education and medical exclusion
– Political Gifts
– Charitable deduction
– Marital deduction
– Annual exclusion(s) ($12,000 per donee)
= Taxable gifts for the current period
+ All taxable gifts made in prior periods
= Total taxable gifts to date
Compute tentative tax on total taxable gifts to date
– Gift tax deemed paid
– Unified transfer tax credit
= Gift tax liability on current period gifts
Gross estate (at fair value)
– Deductions:
expenses, indebtedness, taxes, & losses
charitable bequests
marital deduction
state death taxes
family business reduction
= Taxable estate
+ Taxable gifts (made after December 31, 1976)
= Total taxable transfers
Compute
tentative tax on total taxable transfers
– Gift taxes deemed paid
– Unified transfer tax credit
– Other tax credits (state tax credit &, foreign tax credit)
= Estate tax liability
(13,000 per donee)
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Gross Estate
Gross estate:
The gross estate includes all assets
beneficially owned by the decedent at their fair value (not
just assets that are included in “probate”), such as:
personal assets, jewelry, furniture, collectibles
personal residence, car, boat
cash, stocks, bonds, real estate and other investments
rights to receive dividends, interest, wages (if accrued at the
date of death)
the value of businesses owned by the decedent
