Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $156,000, and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old, and the $7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2 and Exhibit 25-4.) Auto Property Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Value $ 38,000 93,000 286,000 Adjusted Basis $ 73,000 128,000 286,000 2,590,000 860,000 1,490,000 1,070,000 1,090,000 10,215,000 800,000 86,000 2,890,000 80,000 Walen Trust Required: a. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts. b. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $1 million, and Montgomery used his 2006 applicable credit to avoid paying any gift tax. c. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $5 million, and Montgomery used his $1 million 2006 applicable exemption to reduce the gift tax in 2006. Montgomery plans to bequeath his investments to charity and leave his remaining assets to his surviving relatives. Note: For all requirements, enter your answers in dollars and not in millions of dollars. a. Amount of estate tax b. Amount of estate tax c. Amount of estate tax
Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $156,000, and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old, and the $7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2 and Exhibit 25-4.) Auto Property Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Value $ 38,000 93,000 286,000 Adjusted Basis $ 73,000 128,000 286,000 2,590,000 860,000 1,490,000 1,070,000 1,090,000 10,215,000 800,000 86,000 2,890,000 80,000 Walen Trust Required: a. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts. b. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $1 million, and Montgomery used his 2006 applicable credit to avoid paying any gift tax. c. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $5 million, and Montgomery used his $1 million 2006 applicable exemption to reduce the gift tax in 2006. Montgomery plans to bequeath his investments to charity and leave his remaining assets to his surviving relatives. Note: For all requirements, enter your answers in dollars and not in millions of dollars. a. Amount of estate tax b. Amount of estate tax c. Amount of estate tax
Chapter11: Property Dispositions
Section: Chapter Questions
Problem 33P
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Question
Rahul
Transcribed Image Text:Comprehensive Problem 14-68 (LO 14-1, LO 14-2, LO 14-3, LO 14-4) (Algo)
Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash
surrender value of $156,000, and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by
Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to
Montgomery's faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years
old, and the §7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving
relatives. (Refer to Exhibit 25-1, Exhibit 25-2 and Exhibit 25-4.)
Auto
Property
Personal effects
Checking and savings accounts
Investments
Residence
Life insurance proceeds
Real estate investments
Value
Adjusted Basis
$ 38,000
93,000
286,000
$ 73,000
128,000
286,000
2,590,000
860,000
1,490,000
1,070,000
1,090,000
10,215,000
800,000
86,000
2,890,000
80,000
Walen Trust
Required:
a. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts.
b. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The
taxable gift was $1 million, and Montgomery used his 2006 applicable credit to avoid paying any gift tax.
c. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The
taxable gift was $5 million, and Montgomery used his $1 million 2006 applicable exemption to reduce the gift tax in 2006.
Montgomery plans to bequeath his investments to charity and leave his remaining assets to his surviving relatives.
Note: For all requirements, enter your answers in dollars and not in millions of dollars.
a. Amount of estate tax
b. Amount of estate tax
c. Amount of estate tax
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