Tom Hruise was an entertainment executive who had a fatal accident on a film set. Tom's will directed his executor to distribute his cash and stock to his wife, Kaffie, and the real estate to his church, The First Church of Methodology. The remainder of his assets were to be placed in trust for his three children. Tom's estate consisted of the following: Assets: Personal assets $ 1,090,000 Cash and stock 25,100,000 Intangible assets (film rights) 77,000,000 Real estate 16,100,000 Liabilities: Mortgage Other liabilities $ 119,290,000 $ 4,300,000 5,200,000 $ 9,500,000 a. Tom made a taxable gift of $6.20 million in 2011. Compute the estate tax for Tom's estate. (Refer to Exhibit 25-1 and Exhibit 25-2.)
Tom Hruise was an entertainment executive who had a fatal accident on a film set. Tom's will directed his executor to distribute his cash and stock to his wife, Kaffie, and the real estate to his church, The First Church of Methodology. The remainder of his assets were to be placed in trust for his three children. Tom's estate consisted of the following: Assets: Personal assets $ 1,090,000 Cash and stock 25,100,000 Intangible assets (film rights) 77,000,000 Real estate 16,100,000 Liabilities: Mortgage Other liabilities $ 119,290,000 $ 4,300,000 5,200,000 $ 9,500,000 a. Tom made a taxable gift of $6.20 million in 2011. Compute the estate tax for Tom's estate. (Refer to Exhibit 25-1 and Exhibit 25-2.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Tom Hruise was an entertainment executive who had a fatal accident on a film set. Tom's will directed his executor to
distribute his cash and stock to his wife, Kaffie, and the real estate to his church, The First Church of Methodology. The
remainder of his assets were to be placed in trust for his three children. Tom's estate consisted of the following:
Assets:
Personal assets
Cash and stock
Intangible assets (film rights)
Real estate
Liabilities:
Mortgage
$ 1,090,000
25,100,000
77,000,000
16,100,000
Other liabilities
$ 119,290,000
$ 4,300,000
5,200,000
$ 9,500,000
a. Tom made a taxable gift of $6.20 million in 2011. Compute the estate tax for Tom's estate. (Refer to Exhibit 25-1 and
Exhibit 25-2.)
(Enter your answers in dollars, not millions of dollars.)
Transcribed Image Text:EXHIBIT 25-1 Unified Transfer Tax Rates*
Tax Base Equal to or Over
Not Over
S
0
$10,000
20,000
40,000
60,000
80,000
100,000
150,000
250,000
500,000
750,000
1,000,000
Show Transcribed Text
10,000
20,000
40,000
60,000
80,000
100,000
23,800
150,000
38,800
250,000
70,800
500,000
155,800
750,000
248,300
1,000,000
345,800
*The applicable credit and exemption are zero for estates that opted out of the estate tax in 2010.
1986
1987-1997
1998
1999
EXHIBIT 25-2 The Exemption Equivalent
Year of Transfer
Gift Tax
$500,000
600,000
625,000
650,000
675,000
1,000,000
1,000,000
1,000,000
1,000,000
5,000,000
5,120,000
2000-2001
2002-2003
2004-2005
2006-2008
2009-2010*
S
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Ć
Tentative Tax
$0
1,800
3,800
8,200
5,250,000
5,340,000
5,430,000
5,450,000
5,490,000
11,180,000
11,400,000
11,580,000
11,700,000
13,000
18,200
Plus
Estate Tax
$500,000
600,000
625,000
650,000
675,000
1,000,000
1,500,000
2,000,000
3,500,000
5,000,000
5,120,000
5,250,000
5,340,000
5,430,000
5,450,000
5,490,000
11,180,000
11,400,000
11,580,000
11,700,000
18%
20
22
24
26
28
30
32
34
37
39
40
of Amount Over
S
0
10,000
20,000
40,000
60,000
80,000
100,000
150,000
250,000
500,000
750,000
1,000,000
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