What is the value of Jonathan’s gross estate?

Gross Estate = assets + life insurance policies not in irrevocable trusts

Gross Estate = $4,155,000 + 315,000 = $4,470,000

Determine the value of his taxable estate?

Taxable Estate = Gross Estate – liabilities - funeral expenses – administrative expenses – charitable deductions

Taxable Estate = $4,470,000 - 19,750 – 67,000 – 154,000 = $4,229,250

Determine his gift-adjusted taxable estate?

Gift-adjusted Taxable Estate = Taxable estate + gifts in excess of the annual allowance

Gift-adjusted Taxable Estate = 4,229,250 + 6,000 + 13,000 = $4,248,250

Of the $18,000 each year, $5,000 was paid directly to the school, so it is not counted in the tax-free gift. Only the $13,000 is counted, minus a $11,000 exclusion for three years, or $6,000.

Of the $25,000 in 2006, $12,000 was the tax-free exclusion, resulting in $13,000 to be added in excess of the allowance.

Determine his estate tax liability for 2009 on gift-adjusted tax of $4,248,250?

Amount Above   Year            Tax on Column A         Rate on Excess

            $3,500,000         2009             $1,455,800                  45%

$1,455,800+ .45 * (4,248,250-3,500,000) =    $1,792,513

The unified credit amount in 2009 is $1,455,800.

The estate tax is the difference between tax owed and the unified credit                                

2009 Estate Tax = (1,455,800 + 336,712.5) - $1,455,800 unified credit = $336,712.5