12.4 - Estate Tax

Question 1

Estate Tax

True or False >>>

Estate = Principal

Answer 1

True

Question 2

Estate Tax

Is estate tax and estate income tax the same?

Answer 2

No

Question 3

Estate Tax

Define estate tax

Answer 3

• 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

Question 4

Estate Tax Computation

Calculate taxable estate

Answer 4

Gross Estate

• Deductions (Expenses, claims, taxes, casualty & theft losses

Charitable bequests, marital deduction)

= Taxable Estate

Question 5

Estate Tax Computation

Calculate total taxable transfers

Answer 5

=Taxable Estate

+Taxable gifts made after 1976

=Total taxable transfers

Question 6

Estate Tax Computation

Calculate tentative estate tax

Answer 6

Total taxable transfers

* Tax rate

= Tentative estate tax

Question 7

Estate Tax Computation

Calculate estate tax liability

Answer 7

Tentative estate tax

• Gift taxes paid on post-1976 gifts
• Applicable credit amount
• Other credits

= Estate tax liability

Question 8

Gross Estate

What is all included in the gross estate?

HINT: 5 bullet points

Answer 8

• 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

Question 9

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

Answer 9

then value of property to be included in gross estate is equal to percentage of purchase price paid by that decedent

Question 10

Gross Estate

Define dower

Answer 10

• Entitles surviving wife to a portion of lands her husband owned & possessed during marriage

Question 11

Gross Estate

Define curtesy

Answer 11

• Entitles a surviving husband to a life estate in all of his wife’s land if they had children

Question 12

Inter Vivos Transfer

What are inter vivos transfers?

Answer 12

• Transfers between the living

Question 13

Inter Vivos Transfer

True or False >>>

• Gross estate includes assets transferred if decedent retained power over asset

Answer 13

True

Question 14

Inter Vivos Transfer

Define the rights or interests that would belong to the decedent if they retained power over assets

Answer 14

• Right to designate
• Reversionary interest
• Ability to alter, amend, revoke or terminate transfer

Question 15

Valuing Gross Estate

What value is used when valuing the gross estate?

Answer 15

• FMV of assets

Question 16

Valuing Gross Estate

What is the valuation date for valuing the gross estate?

Answer 16

• Valuation date can vary

Question 17

Deductions from Gross Estate

Define alternate valuation date

Answer 17

• Executor elects another valuation date which is 6 months after decedent’s death as opposed to using date of death as valuation date

Question 18

Deductions from Gross Estate

Identify the 6 deductions from the gross estate

Answer 18

• Expenses, claims and taxes
• Certain expenses of selling property
• Administration / funeral expenses
• Medical expenses
• Charitable contributions
• Marital transfers

Question 19

Deductions from Gross Estate

Are federal estate taxes or income taxes paid on income received after death deductible from the gross estate?

Answer 19

No

Question 20

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?

Answer 20

• is allowed to the extent interest is included in the gross estate

Question 21

Deductions from Gross Estate

How are medical expenses incurred but not paid prior to death treated?

Answer 21

• deductible on decedent’s final tax return

Question 22

Deductions from Gross Estate

Identify certain property selling expenses that are considered deductions from the gross estate

Answer 22

• To pay decedent’s debts
• To pay administrative expenses
• To pay taxes
• Preserve the estate
• Effect distribution

Question 23

Applicable Credit Amount

What is the applicable credit amount of ACA for 2016?

Answer 23

$2,125,800

Question 24

Applicable Credit Amount

What is the purpose of the ACA or applicable credit amount?

Answer 24

• Minimizes / eliminates most estate tax
  
  • Used to eliminate estate tax below $5 million

Question 25

# Applicable Credit Amount How much a decedent's estate is effectively tax-free if the maximum ACA is taken?

Answer 25

$5.45 million

Question 26

# Applicable Credit Amount Who is mainly affected by the estate tax and why?

Answer 26

* Because of credit mainly wealthy taxpayers are effected by estate tax

Question 27

# Applicable Credit Amount True or False \>\>\> * Unused exclusion of deceased spouses $5.45 million may be used by surviving spouse

Answer 27

True - * Surviving spouse could possibly have an available exclusion of $10.9 million

Question 28

# Estate Tax Return When is the estate tax return due?

Answer 28

* within 9 months of death

Question 29

# Estate Tax Return Are extensions available for estate tax returns?

Answer 29

* 6-month extension is available

Question 30

# Estate Tax Return Identify the form used to file an estate tax return

Answer 30

* Must file form 706 if gross estate exceeds a threshold of $5.45 million for 2016

Question 31

# Estate Tax Return What is the extension time for making payments on an estate tax return?

Answer 31

1 year past due date

Question 32

Are there ever exceptions to the payment date being extended past the extension due date? If so, when are payments due?

Answer 32

* Reasonable cause may extend up to 10 years