PERSONAL FINANCE
8th Edition
ISBN: 9780134730981
Author: KEOWN
Publisher: PEARSON
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Question
Chapter 16, Problem 3PA
Summary Introduction
(a)
To determine:
Gross value of M’s estate.
Introduction:
Estate is the sum total of all the money, assets and properties held by a person expressed in monetary terms.
Expert Solution
Explanation of Solution
Given,
Value of assess at the time of M’s death is $8,600,000.
Cost of her funeral is $18,000.
Estate administration cost is $52,000.
Amount for charities as per will is $1,000,000.
Gross value of estate is the total value of all the assets and properties which are left behind after the death of a person.
Hence, the gross value of M’s estate would be $8,600,000.
Conclusion
Thus, the total gross value of M’s estate will be the total value of all the assets left over after her death which is $8,600,000.
Summary Introduction
(b)
To determine:
Taxable value of M’s estate.
Introduction:
Taxable value
is the value of an estate of a person after eligible deductions upon which the tax is charged.
Expert Solution
Explanation of Solution
Given,
Value of assess at the time of M’s death is $8,600,000.
Cost of her funeral is $18,000.
Estate administration cost is $52,000.
Amount for charities as per will is $1,000,000.
Taxable value of estate is calculated after making several adjustments to the gross value of estate and it will be,
| Particulars | Amount ($) |
| 13. Calculate gross value of estate | |
| j. Value of gross estate | 8,600,000 |
| 14. Calculate taxable estate | |
| Less: | |
| Funeral expenses | 18,000 |
| Estate administration expenses | 52,000 |
| Taxes | Nil |
| Charitable deductions | 1,000,000 |
| k. Taxable estate | 7,530,000 |
| 15. Calculate gift adjusted taxable estate | |
| Plus: Amount of gift in excess of annual deduction | Nil |
| Less: Estate tax free transfer threshold | Nil |
| l. Gift adjusted taxable estate | 7,530,000 |
Table (1)
Hence, the taxable estate value is $7,530,000.
Conclusion
Thus, the taxable value of M’s estate after all eligible deductions is $7,530,000.
Summary Introduction
(c)
To determine:
Gift adjusted taxable value of M’s estate.
Introduction:
Gift
is a present willingly given to someone without receiving any monetary return or consideration against it.
Expert Solution
Explanation of Solution
Given,
Value of assess at the time of M’s death is $8,600,000.
Cost of her funeral is $18,000.
Estate administration cost is $52,000.
Amount for charities as per will is $1,000,000.
Taxable value of gift adjusted taxable estate is calculated after making several adjustments to the gross value of estate and it will be,
| Particulars | Amount ($) |
| 1. Calculate gross value of estate | |
| a. Value of gross estate | 8,600,000 |
| 2. Calculate taxable estate | |
| Less: | |
| Funeral expenses | 18,000 |
| Estate administration expenses | 52,000 |
| Taxes | Nil |
| Charitable deductions | 1,000,000 |
| b. Taxable estate | 7,530,000 |
| 3. Calculate gift adjusted taxable estate | |
| Plus: Amount of gift in excess of annual deduction | Nil |
| Less: Estate tax free transfer threshold | 5,340,000 |
| c. Gift adjusted taxable estate | 2,190,000 |
Table (2)
Hence, the taxable estate value is $2,190,000.
Conclusion
Thus, the taxable value of M’s gross gift adjusted estate after all eligible deductions is $2,190,000.
Summary Introduction
(d)
To determine:
Taxable value of M’s estate after his death
Expert Solution
Explanation of Solution
Given,
Value of assess at the time of M’s death is $8,600,000.
Cost of her funeral is $18,000.
Estate administration cost is $52,000.
Amount for charities as per will is $1,000,000.
Taxable value of estate after the death of M is calculated after making several adjustments to the gross value of estate and it will be,
| Particulars | Amount ($) |
| 1. Calculate gross value of estate | |
| a. Value of gross estate | 8,600,000 |
| 2. Calculate taxable estate | |
| Less: | |
| Funeral expenses | 18,000 |
| Estate administration expenses | 52,000 |
| Taxes | Nil |
| Charitable deductions | 1,000,000 |
| b. Taxable estate | 7,530,000 |
| 3. Calculate gift adjusted taxable estate | |
| Plus: Amount of gift in excess of annual deduction | Nil |
| Less: Estate tax free transfer threshold | 5,340,000 |
| c. Gift adjusted taxable estate | Nil |
| 4. Calculate estate tax | |
| Estate tax is 40 percent of gift adjusted taxable estate | 2,190,000 |
Table (3)
Hence, the taxable estate value is $2,190,000.
Conclusion
Thus, the taxable value of M’s estate after his death and after all eligible deductions is $2,190,000.
Summary Introduction
(e)
To determine:
Estate tax liability of M.
Expert Solution
Explanation of Solution
Given,
Value of assess at the time of M’s death is $8,600,000.
Cost of her funeral is $18,000.
Estate administration cost is $52,000.
Amount for charities as per will is $1,000,000.
Taxable value of estate is calculated after making several adjustments to the gross value of estate and it will be,
| Particulars | Amount ($) |
| 1. Calculate gross value of estate | |
| a. Value of gross estate | 8,600,000 |
| 2. Calculate taxable estate | |
| Less: | |
| Funeral expenses | 18,000 |
| Estate administration expenses | 52,000 |
| Taxes | Nil |
| Charitable deductions | 1,000,000 |
| b. Taxable estate | 7,530,000 |
| 3. Calculate gift adjusted taxable estate | |
| Plus: Amount of gift in excess of annual deduction | Nil |
| Less: Estate tax free transfer threshold | 5,340,000 |
| c. Gift adjusted taxable estate | 2,190,000 |
| 4. Calculate estate tax | |
| Estate tax is 40 percent of gift adjusted taxable estate | 876,000 |
Table (4)
Hence, the estate tax is $876,000.
Conclusion
Thus, the estate tax after all eligible deductions is $876,000.
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Chapter 16 Solutions
PERSONAL FINANCE
Ch. 16 - Prob. 1PACh. 16 - Prob. 2PACh. 16 - Prob. 3PACh. 16 - Prob. 4PACh. 16 - Prob. 5PACh. 16 - Prob. 6PACh. 16 - Prob. 1DC1Ch. 16 - Prob. 2DC1Ch. 16 - Prob. 3DC1Ch. 16 - Prob. 4DC1
Ch. 16 - Prob. 5DC1Ch. 16 - Prob. 6DC1Ch. 16 - Prob. 7DC1Ch. 16 - Prob. 8DC1Ch. 16 - Prob. 9DC1Ch. 16 - Prob. 10DC1Ch. 16 - Prob. 1DC2Ch. 16 - Prob. 2DC2Ch. 16 - Prob. 3DC2Ch. 16 - Prob. 4DC2Ch. 16 - Prob. 5DC2Ch. 16 - Prob. CC.1QCh. 16 - Prob. CC.2QCh. 16 - Prob. CC.3QCh. 16 - Prob. CC.4QCh. 16 - Prob. CC.5QCh. 16 - Prob. CC.6QCh. 16 - Prob. CC.7QCh. 16 - Prob. CC.8QCh. 16 - Prob. CC.9QCh. 16 - Prob. CC.10QCh. 16 - Prob. CC.11QCh. 16 - Prob. CC.12QCh. 16 - Prob. CC.13QCh. 16 - Prob. CC.14QCh. 16 - Prob. CC.15QCh. 16 - Prob. CC.16QCh. 16 - Prob. CC.17QCh. 16 - Prob. CC.18QCh. 16 - Prob. CC.19QCh. 16 - Prob. CC.20Q
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