Taxable $2,500,000 Adjusted taxable 10,000 Total $2,510,000 Tax on $2,510,00 1,015,400 Less: gift taxes paid on lifetime transfers -0- Less: unified credit 780,800 Tax due $234,600 A second credit is available for gift tax paid on gifts made before 1977 where the property is included in the donor's gross estate
because of retained strings in the gifted property.
Subject to two kinds of exceptions, gifts made within three years of death by donors who die after 1981 are not brought back into the donor's gross estate
under the bringback rule of IRC Section 2035 (see below).
If the decedent was receiving a straight life annuity, there is no property interest remaining at his death to be included in his gross estate
. But if the contract provides a survivor benefit (as under a refund life annuity, joint and survivor annuity, or installment option), tax results depend upon whether the survivor benefit is payable to decedent's estate or to a named beneficiary and, if payable to a named beneficiary, upon who paid for the contract.
When an estate tax return is filed, we are likewise dealing with terms such as gross estate
, adjusted gross estate
, taxable estate, deductions, and credits.
The gross estate
of the decedent consists of an accounting of everything your client owns or has certain interests in at the date of death (Refer to Form 706 at www.irs.gov/pub/irs-pdf/f706.pdf) The fair market value of these items is used, not necessarily what was paid for them or what their values were when acquired.
Similarly, qualified pension plans are no longer excluded from a decedent's gross estate
11 (2005)], the Tax Court ruled that the value of individual retirement accounts (IRA) in the gross estate
could not be reduced by the anticipated income taxes paid by the beneficiaries following the distribution of the assets in the IRAs.
When a deferred annuity owner dies before the annuity matures, the annuity's cash value is included in his gross estate
(IRC [section] 2039[a]).
As noted above, adjustments must first be made to the value of the qualified family-owned business interest and to the gross estate
, before calculating whether the adjusted value of the interest exceeds the 50% threshold of the adjusted gross estate
To calculate your estate tax liability, first you'll need to have calculated your adjusted gross estate
Planning objectives you may want to focus on include transferring control to appropriate successors, reducing gross estate
, retaining assets that will provide adequate retirement income, transferring future appreciation in the value of the business, and providing liquidity for the estate.
This area becomes more troublesome when three-way JTWROS ownership of property is involved in the gross estate
of a decedent spouse.