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Step 4: Determine tentative tax for taxable gifts made in the current year20
Computing Gift Tax and Tax Liability, cont’d 21
22Donee’s Basis and Holding Period for GiftsBasis: The donee’s basis for a gift depends upon whether the donee will realize gain or loss on the disposition of the giftGain 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 PeriodIf gain basis used, donor’s holding period tacksIf 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.
24Estate Taxes FormulaFormula 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 sameGift 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)
25Gross EstateGross 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, collectiblespersonal residence, car, boat cash, stocks, bonds, real estate and other investmentsrights to receive dividends, interest, wages (if accrued at the date of death)the value of businesses owned by the decedent