At the time of her death amber owns property worth

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South-Western Federal Taxation 2020: Individual Income Taxes
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Chapter 9 / Exercise 2
South-Western Federal Taxation 2020: Individual Income Taxes
Young/Nellen/Hoffman
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143. At the time of her death, Amber owns property worth $5,000,000. Other information regarding her affairs is as follows.Unpaid pledge to the building fund of her church$50,000College graduation gift she had promised her grandson20,000Local property taxes owed (accrued prior to death)100,000Casualty loss to uninsured vacation home (fire occurred one month before death)500,000Mortgage owed on personal residence800,000All of these items (except the casualty loss) were paid by her estate, and none were deducted on Form 1041 (income tax return of the estate). What is Amber’s taxable estate?$4,050,000. $5,000,000 (gross estate) – $50,000 (church pledge) – $100,000 (local property taxes) – $800,000 (mortgage) = $4,050,000. The graduation gift is not supported by consideration and does not qualify as an obligation of the estate. A special rule provides otherwise as to unpaid church pledges. The casualty loss should be reported on Amber’s final Form 1040.
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South-Western Federal Taxation 2020: Individual Income Taxes
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Chapter 9 / Exercise 2
South-Western Federal Taxation 2020: Individual Income Taxes
Young/Nellen/Hoffman
Expert Verified
144. At the time of Clint’s death, part of his estate consists of the following.·Roth IRA (value of $1,000,000) with Jennifer as the designated beneficiary.·Land (worth $3,000,000) held in joint tenancy with Jennifer. Jennifer is Clint’s wife and originally furnished the purchase price.·Building (worth $3,000,000) held as equal tenants in common with Jennifer and Dana. Dana is Clint’s mother, and she originally purchased the property.Under Clint’s will, all of his property passes to his wife, Jennifer. How much marital deduction is Clint’s estate allowed? Clint and Jennifer live in Tennessee.$3,500,000. $1,000,000 + (50% ´ $3,000,000) + (1/3 ´ $3,000,000) = $3,500,000.145. Calvin’s will passes $800,000 of cash to his widowed sister, Muriel. The estate tax attributable to the cash is $110,000. Muriel dies five years later, and the estate tax generated by the $800,000 is $100,000. How much of a credit for tax on prior transfers will Muriel’s estate be allowed? $60,000. 60% ´ $100,000.146. As reflected by the tax law, Congressional policy relative to the Federal gift and estate taxes has been very inconsistent. Comment on this policy regarding the following time periods.a.From original enactment of these taxes up to the Tax Reform Act of 1976.b.From the Tax Reform Act of 1976 to EGTRRA.c.From EGTRRA to the Tax Relief Act (TRA) of 2010.d.From TRA of 2010 to ATRA of 2012.a.This period favored lifetime giving over testamentary transfers. Separate tax rates existed, with those applicable to gifts being lower than those applicable to transfers by death.b.Under the unified transfer tax system enacted in 1976, little difference existed between life and death transfers. The tax rates were the same, and the same credit applied.c.EGTRRA of 2001 favored the estate tax. Although the tax rates are the same for lifetime and testamentary transfers, the estate tax is phased out over a period of time by increases in the exclusion amount. TRA of 2010 was based on the premise that the estate and gift tax credits should again be the same (i.e., unified). For 2011 and 2012, both taxes were subject to a maximum rate of 35% and had a unified credit of $1,730,800 (exemption equivalent of $5,000,000) for 2011 and $1,772,800 (exemption equivalent for $5,120,000) for 2012.
d.By ATRA of 2012, the sunset provisions of EGTRRA were rescinded and changes made by TRA of 2010 continued. However, the maximum tax rate of 35% was raised to 40%. For 2013, therefore, the credit is $2,045,800 (exemption equivalent of $5.25 million).

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