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Harold and Maude are married and live in a common-law state. Neither have made any taxable gifts and Maude owns (holds title) all their property.


Harold and Maude are married and live in a common-law state. Neither have made any taxable gifts and Maude owns (holds title) all their property. She dies with a taxable estate of $15 million and leaves it all to Harold. He dies several years later, leaving the entire $15 million to their three children.

Calculate how much estate tax would have been saved using the 2012 rate schedule and unified credit if Maude had used a bypass provision in her will to direct $9 million to her children and the remaining $6 million to Harold. Ignore the DSUEA and all credits in this problem except for the unified credit. (Enter your answers in dollars not in millions. Reference the tax rate schedule in Exhibit 25-1 and the Unified Credit schedule in Exhibit 25-5 to answer this problem. Omit the "$" sign in your response.)

Exhibit 25-1:
Tax Base equal Not over: Tentative tax: Plus: of amount over:
to or over:
$500,000 $155,800 35% $500,000

Exhibit 25-5:

Period Recalculated Unified Credit
1985 $121,800
1986 $155,800
1987 through 1997 $190,800
1998 $199,500
1999 $208,300
2000 and 2001 $217,050
2002 through 2010 $330,800
2011 $1,730,800
2012 $1,772,800

Year of Death: File return if estate's value is more than:
2002 and 2003 1,000,000
2004 and 2005 1,500,000
2006, 2007, and 2008 2,000,000
2009 3,500,000
2010 and 2011 5,000,000
2012 5,120,000

Gift Tax Annual Exclusion
Year(s) Annual Exclusion
1998 – 2001 $10,000
2002 – 2005 $11,000
2006 – 2008 $12,000
2009 – 2012 $13,000

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