Reference no: EM133166104
Question - Bobby (single, age 62) lives in Hailey, Idaho. He wants to do some financial planning and as part of that exercise, he wants you to compute what her estate tax liability would be if he died in 2021. Bobby gives you the following list of everything he owns:
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Asset
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Adjusted Basis
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Fair Market Value
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Primary residence
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$ 980,000
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$ 1,400,000
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Vacation home
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375,000
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685,000
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Investment portfolio
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2,770,000
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4,500,000
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|
Real estate investments
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2,850,000
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6,125,000
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Checking and savings accounts
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250,000
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250,000
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Vehicle
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105,000
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70,000
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Personal effects
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210,000
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75,000
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Art collection
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72,000
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190,000
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Bobby's will directs $100,000 to be left to her church and $100,000 to be given to her high school to start a scholarship fund in her name upon her death. He anticipates funeral costs of $20,000. Bobby's current debts consist of a $120,000 balance on the vacation home mortgage and $25,000 on a line of credit. [These debts are valid deductions for estate tax purposes.] It is estimated that attorney and accounting fees to administer her estate will be $86,000. Bobby is unmarried and intends to leave all of her assets to her surviving siblings, with the exception of the charitable contributions already noted above.
Required - Answer the following questions based on the above fact pattern. Be sure to clearly label each step of your calculations so partial credit can be awarded even if your final answer is incorrect.
1. Compute the amount of estate tax due if Bobby dies in 2021, assuming he never made any taxable gifts.
2. Compute the amount of estate tax due if Bobby dies in 2021, assuming he made one taxable gift of $1,000,000 in 2019 and used the applicable credit amount to avoid paying gift tax. (Note: A taxable gift means the amount over and above the annual exclusion amount.)
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