Reference no: EM13557937

Margaret Leonard, age 85, and a resident of a non-community property state, died on July 2, 2012.

She was survived by her husband Carl, age 82, their two children, and four grandchildren. Margaret's probate estate consisted of the following assets:

	FMV at Date of Death
Cash in bank	$ 29,000
Automobiles	32,000
Personal effects and jewelry	65,000
Undeveloped r6al estate	3,200,000
Marketable securities	1,450,000

 

Margaret and Carl owned their personal residence as joint tenants with right of survivorship. Carl purchased the home in 1961 with his own funds. The home had an appraised value of $320,000 at the date of Margaret's death.

In 1965, Margaret became the beneficiary of a trust created under the terms of her father's will.

Margaret was to receive the income from the trust for her lifetime, and was given the testamentary power to appoint the corpus of the trust to any of her children or grandchildren. If Margaret failed to exercise this power in her will, the corpus was to be divided per capita among the children and grandchildren living at her death. In her will, Margaret appointed the entire trust corpus, valued at $950,000, to her granddaughter Sara.

Margaret and her brother George hold Flaming Corporation stock as equal tenants in common.

They had inherited the stock from their mother. The FMV of the stock at Margaret's death was $600,000.

h20A7, Margaret transferred real estate worth $2,448,000 to her two children as co-tenants. At Margaret's date of,death, this real estate was worth $2,500,000.

Margaret and her daughter, Blossom, acquired atract of land as joint tenants with right of survivorship in 2008.

Margaret provided $80,000 and Blossom provided $20,000. Of the $20,000 provided by Blossom, $5,000 was a cash graduation gift from Margaret and $15,000 was from amounts earned by Blossom. At the date of Margaret's death the land had a FMV of $125,000.

The proceeds of a $250,000 life insurance policy on Margaret'$ life were payable to Margaret's younger sister Joan as beneficiary. Margaret was the owner of this policy until two years ago when she transferred ownership to Carl.

The value of the policy for gift tax purposes was $48,000, but because of the availability of the marital deduction, Margaret paid no gift tax on the transfer.

The valid debts payable out of Margaret's estate totaled $16,000 and funeral and administrative expenses were $20,000. The executor did not take a deduction for any of the administrative expenses on the estate's Federal income tax return.

Under the terms of Margaret's will, $100,000 was bequeathed to Bradley University to create a scholarship fund in Margaret's name. After the settlement of all debts and expenses, the remainder of her probate estate was to be divided equally between her two children.

Required:

1. Calculate Margaret's Federal gift tax liability on gifts made to her children. Assume Margaret and

Carl elected gift splitting.

2. Calculate the following and show your work:

a. Gross estate

b. Taxable estate.

c. The Federal estate tax liability payable on the taxable estate.