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:

Asset	Adjusted Basis	Fair Market Value
Primary residence	$ 980,000	$ 1,400,000
Vacation home	375,000	685,000
Investment portfolio	2,770,000	4,500,000
Real estate investments	2,850,000	6,125,000
Checking and savings accounts	250,000	250,000
Vehicle	105,000	70,000
Personal effects	210,000	75,000
Art collection	72,000	190,000

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.)