Federal Estate Tax Calculation-Project #2 At his death, John Walker owned in his
ID: 2709613 • Letter: F
Question
Federal Estate Tax Calculation-Project #2
At his death, John Walker owned in his own name a house worth $250,000,
two cars worth a total of $42,000, common stock worth $400,000, and bank
accounts worth $300,000. He also held in joint ownership with his wife of
a summer cottage worth $80,000, bank accounts worth $200,000, and
bonds worth $150,000. He held in joint ownership with his daughter a
bank account worth $10,000, to which he had made all the contributions.
A year before his death, he made a gift of $10,000 in cash to his son.
John's wife also owned an insurance policy on his life, payable in the
amount of $300,000 at his death; she had applied for the policy herself and
always owned it. At John's death, he was receiving a pension that had a
survivorship benefit, payable to his wife, worth $400,000. He made no
gifts in his lifetime other than the $10,000 gift to his son. No community
property was involved.
What was the value of John Walker's gross estate at his death?
In addition to the information given above, assume John Walker left a will
giving his house to the University of Chicago and all the rest, residue, and
remainder of his property to his two children equally, with all debts,
expenses, and taxes payable from this residue. John left nothing to his wife
in his will, and she did not contest the will. John's debts came to a total of
$18,000. His funeral expenses were $6,000, and the expenses of
administering his estate were $25,000.
What are the deductions for John Walker's estate based on these additional
facts?
Using the worksheet, calculate John Walker's net federal estate tax
assuming he died in the current year. Assume there are no credits other than the
unified credit and the state death tax credit.
FEDERAL ESTATE CALCULATION WORKSHEET
1. Decedent's total gross estate $_______
Subtract deductions:
a. Funeral and administrative expenses $__________
b. Debts of decedent, mortgages, and liens $__________
Equals adjusted gross estate $__________
c. Marital deduction $__________
d. Charitable deduction $__________
Equals taxable estate $__________
3. Add adjusted taxable gifts $__________
Equals tax base $__________
4. Compute tentative tax using the transfer tax table:
a. Lower bracket amount $__________
b. Tax on lower bracket amount $__________
c. Excess over bracket amount $__________
d. Tax rate on excess ___% $__________
e. Tax on bracket excess amount $
Equals total tentative tax $__________
5. Subtract credits:
a. Gift taxes paid on post-1976 gifts $__________
b. Unified credit amount $__________
c. State death tax credit $
d. Credit for taxes on pre-1977 gifts $__________
e. Foreign death tax credit $__________
f. Credit for tax on prior transfers $__________
Equals net estate tax due $__________
6. Add Additional transfer taxes due:
a. Generation-skipping transfer tax $__________
Equals total transfer tax due $__________
Explanation / Answer
FEDERAL ESTATE CALCULATION WORKSHEET
1. Decedent's total gross estate ($250,000+ 42,000 + 300,000+ 400,000) + 50% ( 80,000 + 200,000 + $150,000+ 10000 + 10000 = $992,000 + $225,000 = $1,217,000
Subtract deductions:
a. Funeral and administrative expenses (6000 + 25000) - $31,000
b. Debts of decedent, mortgages, and liens -$18,000
Equals adjusted gross estate $1,168,000
c. Marital deduction $0
d. Charitable deduction $0
Equals taxable estate $_$1,168,000
3. Add adjusted taxable gifts $__________
Equals tax base $__________
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