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Case Study #2 Answer

 

A. Calculating your federal estate tax requires calculating your estate tax then subtracting your unified credit. On an estate of $4.2 million, the amount in 2009 would be (from the table):

Amount Above           Year    Tax on Column A         Rate on Excess

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

$1,455,800 + .45 * (4,200,000-3,500,000) = $1,770,800

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

The tax is the difference                                 $315,000

B. Assuming that $2.2 million is held in an irrevocable trust, the taxable estate drops to $2 million, which is below the exemption equivalent of $3.5 million in 2009, so estate taxes would be $0. 



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