12.4 - Estate Tax Flashcards
Estate Tax
True or False >>>
Estate = Principal
True
Estate Tax
Is estate tax and estate income tax the same?
No
Estate Tax
Define estate tax
- tax levied on the principal net value of the estate of a a deceased person before distributing to heirs or beneficiaries
- also known as a one time transfer tax
Estate Tax Computation
Calculate taxable estate
Gross Estate
- Deductions (Expenses, claims, taxes, casualty & theft losses
Charitable bequests, marital deduction)
= Taxable Estate
Estate Tax Computation
Calculate total taxable transfers
=Taxable Estate
+Taxable gifts made after 1976
=Total taxable transfers
Estate Tax Computation
Calculate tentative estate tax
Total taxable transfers
* Tax rate
= Tentative estate tax
Estate Tax Computation
Calculate estate tax liability
Tentative estate tax
- Gift taxes paid on post-1976 gifts
- Applicable credit amount
- Other credits
= Estate tax liability
Gross Estate
What is all included in the gross estate?
HINT: 5 bullet points
- FMV of all property in which decedent owned a beneficial interest
- Value of surviving spouse’s interest in property as dower or curtesy
- 50% of property held as joint tenants by spouses or as tenants by the entirety regardless of the amount of consideration provided by each spouse
- Value of property interests are included where decedent had general POA
- Gift taxes paid on gifts within 3 years before death
Gross Estate
Gross estate includes 50% of property held as joint tenants by spouses or as tenants by the entirety regardless of the amount of consideration provided by each spouse. Define the treatment if couple is not married
then value of property to be included in gross estate is equal to percentage of purchase price paid by that decedent
Gross Estate
Define dower
- Entitles surviving wife to a portion of lands her husband owned & possessed during marriage
Gross Estate
Define curtesy
- Entitles a surviving husband to a life estate in all of his wife’s land if they had children
Inter Vivos Transfer
What are inter vivos transfers?
- Transfers between the living
Inter Vivos Transfer
True or False >>>
- Gross estate includes assets transferred if decedent retained power over asset
True
Inter Vivos Transfer
Define the rights or interests that would belong to the decedent if they retained power over assets
- Right to designate
- Reversionary interest
- Ability to alter, amend, revoke or terminate transfer
Valuing Gross Estate
What value is used when valuing the gross estate?
- FMV of assets
Valuing Gross Estate
What is the valuation date for valuing the gross estate?
- Valuation date can vary
Deductions from Gross Estate
Define alternate valuation date
- Executor elects another valuation date which is 6 months after decedent’s death as opposed to using date of death as valuation date
Deductions from Gross Estate
Identify the 6 deductions from the gross estate
- Expenses, claims and taxes
- Certain expenses of selling property
- Administration / funeral expenses
- Medical expenses
- Charitable contributions
- Marital transfers
Deductions from Gross Estate
Are federal estate taxes or income taxes paid on income received after death deductible from the gross estate?
No
Deductions from Gross Estate
In the case of marital transfers, how are deductions for the value of any interest in property that passes from the decedent to the surviving spouse treated?
- is allowed to the extent interest is included in the gross estate
Deductions from Gross Estate
How are medical expenses incurred but not paid prior to death treated?
- deductible on decedent’s final tax return
Deductions from Gross Estate
Identify certain property selling expenses that are considered deductions from the gross estate
- To pay decedent’s debts
- To pay administrative expenses
- To pay taxes
- Preserve the estate
- Effect distribution
Applicable Credit Amount
What is the applicable credit amount of ACA for 2016?
$2,125,800
Applicable Credit Amount
What is the purpose of the ACA or applicable credit amount?
- Minimizes / eliminates most estate tax
- Used to eliminate estate tax below $5 million
Applicable Credit Amount
How much a decedent’s estate is effectively tax-free if the maximum ACA is taken?
$5.45 million
Applicable Credit Amount
Who is mainly affected by the estate tax and why?
- Because of credit mainly wealthy taxpayers are effected by estate tax
Applicable Credit Amount
True or False >>>
- Unused exclusion of deceased spouses $5.45 million may be used by surviving spouse
True -
- Surviving spouse could possibly have an available exclusion of $10.9 million
Estate Tax Return
When is the estate tax return due?
- within 9 months of death
Estate Tax Return
Are extensions available for estate tax returns?
- 6-month extension is available
Estate Tax Return
Identify the form used to file an estate tax return
- Must file form 706 if gross estate exceeds a threshold of $5.45 million for 2016
Estate Tax Return
What is the extension time for making payments on an estate tax return?
1 year past due date
Are there ever exceptions to the payment date being extended past the extension due date? If so, when are payments due?
- Reasonable cause may extend up to 10 years
