Augustus Pemberton, a US citizen, died in 2024 with a gross estate of 25,000,000 dollars. His estate has 1,000,000 dollars of deductible debts and administration expenses, makes a 2,000,000 dollar outright bequest to a qualifying public charity, and passes 4,000,000 dollars outright to his surviving wife, a US citizen. He made no prior taxable gifts. His applicable exclusion amount for 2024 is 13,610,000 dollars, and the federal estate tax rate on amounts above the exclusion is a flat 40 percent at this level of estate. What is the federal estate tax due on Form 706?
- A1,756,000 dollars Correct
- B2,556,000 dollars
- C7,200,000 dollars
- D3,356,000 dollars
Why A is correct: After the debts, charitable, and marital deductions the taxable estate is 18,000,000, which exceeds the 13,610,000 exclusion by 4,390,000, taxed at 40 percent.
Why B is wrong: This omits the 2,000,000 dollar charitable deduction, leaving a taxable estate of 20,000,000 and tax of 40 percent of the 6,390,000 excess over the exclusion.
Why C is wrong: This applies the 40 percent rate to the entire 18,000,000 taxable estate, but the tax falls only on the amount that exceeds the applicable exclusion amount.
Why D is wrong: This omits the 4,000,000 dollar marital deduction, leaving a taxable estate of 22,000,000 and tax of 40 percent of the 8,390,000 excess over the exclusion.