chapter 13 chapter The ite ax
1 Chapter 13: The Estate Tax
THE ESTATE TAX The estate tax formula Gross estate valuation Gross estate items Deductions Computation of tax liability Generation-skipping transfer tax
2 THE ESTATE TAX The estate tax formula Gross estate valuation Gross estate items Deductions Computation of tax liability Generation-skipping transfer tax
The Estate Tax Formula (1of3) Gross Estate Deductions(exp, debts, losses Adjusted Gross Estate Marital charitable deductions Taxable estate Prior taxable gifts Estate tax base 3
3 The Estate Tax Formula (1 of 3) Gross Estate - Deductions (exp, debts, & losses) = Adjusted Gross Estate - Marital & charitable deductions = Taxable estate + Prior Taxable Gifts = Estate tax base
The Estate Tax Formula (2of3) Taxable estate is gross estate minus deductions All taxable gifts made after 1976, other than gifts included in gross estate are added to taxable estate Gifts valued at date-of-gift values Sum of two amounts is tax base
4 The Estate Tax Formula (2 of 3) Taxable estate is gross estate minus deductions All taxable gifts made after 1976, other than gifts included in gross estate, are added to taxable estate Gifts valued at date-of-gift values Sum of two amounts is tax base
The Estate Tax Formula (3of3) Compute tentative tax on estate tax base Tentative tax Recomputed gift tax Available unified credit Other credits Estate tax due 5
5 The Estate Tax Formula (3 of 3) Compute tentative tax on estate tax base Tentative tax - Recomputed gift tax - Available unified credit - Other credits = Estate tax due
Gross Estate valuation Gross estate valued at Fmv at either Date of death or alternate or Alternate valuation date >6 mo after death unless dispositions occur Both gross estate tax liability must be reduced for alternate date to be effective 6
6 Gross Estate Valuation Gross estate valued at FMV at either –Date of death or alternate OR –Alternate valuation date »6 mo. after death unless dispositions occur –Both gross estate & tax liability must be reduced for alternate date to be effective
Gross Estate Items (1of2) Property in which decedent had an interest Property transferred to others but Which decedent still controlled or obtained benefits Gift taxes paid on gifts w/in three years of date of death
7 Gross Estate Items (1 of 2) Property in which decedent had an interest Property transferred to others but which decedent still controlled or obtained benefits Gift taxes paid on gifts w/in three years of date of death
Gross Estate Items (2of2) Life insurance Exclusion of certain family owned businesses 8
8 Gross Estate Items (2 of 2) Life insurance Exclusion of certain family owned businesses
Deductions (1of2) 82053 authorizes deductions for Mortgages Other debt owed by decedent Funeral expenses Administration expenses
9 Deductions (1 of 2) §2053 authorizes deductions for – Mortgages –Other debt owed by decedent –Funeral expenses –Administration expenses
Deductions (2of2) Deductions permitted by other code sections Casualty and theft losses Charitable contributions Marital deduction 10
10 Deductions (2 of 2) Deductions permitted by other code sections –Casualty and theft losses –Charitable contributions – Marital deduction