, never having made any prior inter vivos gifts, made taxable gifts of $6 million in 2013. T died in 2014, leaving a taxable estate of $5 million.
In 2002, G created a trust, the income to be paid to G’s child T (our same good old T) for life, remainder to T’s child R. (Don’t worry about G, who is not a part of the problem.) At T’s death in 2014, the remainder interest of the trust corpus, valued at $4 million, was paid over to R.
(a) Using the proper rate computation provided by §2502 and considering the §2505 applicable credit amount, what is T’s gift tax liability for 2013?
(b) Determine the estate tax payable on T’s death in 2014 using the §2001 computation and the §2010 applicable credit amount.
(c) Consider the §2001(b) statutory method for computation of estate tax liability. Are the “taxable gifts” being taxed twice? What is being taxed? How?
(d) Proper computations in both questions (a) and (b) above make use of the applicable credit amount. Is the credit allowed twice?
(e) Using an inclusion ratio equal to one and a taxable amount equal to the value of the remainder interest, what is the amount of tax imposed on the taxable termination generation-skipping transfer that occurs upon T’s death?