Question

Distinguish between an estate tax and an inheritance tax. Do some states impose both? Neither? Which, if either, does the Federal government impose? 18. a. b. 19. LO.4 Jake (age 72) and Jessica (age 28) were recently married. To avoid any transfer taxes, Jake has promised to leave Jessica all of his wealth when he dies. Is Jake under some misconception about the operation of the Federal gift and estate taxes? Explain. 20. LO.4 Address the following issues: What is the purpose of the unified transfer tax credit? Is the same amount available for both the Federal gift tax and the estate tax? Explain. Does the use of the credit for a gift affect the amount of credit available for the estate tax? Explain. a. b. c. 21. LO.4 Elijah and Anastasia are husband and wife who have five married children and nine minor grandchildren. For 2018, what is the maximum amount they can give to their family (including the sons- and daughters-in-law) without using any of their unified transfer tax credit? What is the difference between the Federal income tax on individuals and that imposed on corporations? 23. LO.4 As to those states that impose an income tax, comment on the following: a. b. c. "Piggyback approach and possible "decoupling" from this approach Using IRS audit results as part of a state tax audit. Credit for taxes paid to other states.

Answer 1

18

An estate tax is levied on the net taxable estate of a deceased person. Net taxable estate is calculated by subtracting estate liabilities from the overall value of the estate property

Inheritance tax is to be paid by the person who receives the estate

The tax depends upon which state levies what tax

a.

Maryland imposes both the taxes

Indiana, Tennessee, New Jersey and Delaware do not impose any of the taxes

b.

The federal government imposes only estate tax

19.

There will be no estate tax charged from Jessica is she is a U.S.citizen

20.

a. Unified transfer tax credit is the amount of assets that a person can gift to other person without paying transfer taxes  

b. Yes, the amount is available for both the taxes

c. Yes, the amount used for gift tax can affect the amount left for inheritance tax

21.

As of 2018, a person can give assets valuing to $ 11.2 million without transfer taxes

In the given case, each person can use the $ 11.2 million limit, which brings the total to $ 22.4 million