[hopefulcpa28]

…I just don’t get the “applicable credit” part.

Basically, I understand this much…then I’m dead:

Estate tax must be filed if the person’s gross estate exceeds $5,000,000

I understand hat’s included in gross estate,

Non-discretionary expenses,

Discretionary expenses, etc.

But I don’t get the transfer tax rate, unified credit, etc…

Estate Exclusion for 2011: $5,000,000 and Applicable Credit: $345,800

I understand that up to $5,000,000, no estate tax is required, but what does applicable credit have to do with anything? UGH.

Anyone have a simple way to understand this whole Trust/Estate rules?

[hopefulcpa28]

Anyone?

[NYC_CPA]

Here is my take on the Estate Tax…take it with a grain of salt because I just took Reg yesterday and I'm recycling all Reg materials from my memory to make room for BEC.

Estate tax must be filed if the person's gross estate exceeds $5,000,000

<$5million is for 2011 and I doubt they would test 2011 rules now. Estate tax must be filed if gross exceeds 3.5 million for 2009 and NONE for 2010, hence, Phil Yaeger's comments about 2010 being the best year to die>

But I don't get the transfer tax rate, unified credit, etc…

<Since 3.5 million of your estate is not taxable and if your gross estate is 4 million, you should only get taxed on $500,000(4million minus 3.5 million). But when you file your Estate tax return, you have to list ALL 4 million and compute what the tax would be on 4 million and then give yourself a credit for the first 3.5 million(which is what the unified credit is)>.

I hope that made sense.

"I hate every minute of training, but I said, DON'T QUIT. Suffer now and live the rest of your life as a champion" - Muhammed Ali
FAR: 65(11/10), 80(02/11->Yaeger Audio!)
AUD: 73(05/15/11 Yaeger Homestudy), retake 76(08/31/11)
BEC: 73(08/05/11) Yaeger Homestudy, 71(11/30/11), retake 80(04/20/12)
REG: 80 (11/15/11) Yaeger Homestudy

[hopefulcpa28]

Yes it does! Thank you:) Hope REG went well!!

Btw, since you explained estate tax really well, care to explain gift tax credit as well?

Is it a similar concept? Up to $13,000 per person, tax free…however, lifetime gifts shouldn't exceed certain amounts?

[NYC_CPA]

Is it a similar concept? Up to $13,000 per person, tax free…however, lifetime gifts shouldn't exceed certain amounts?

Yes, it is tax-free upto $13,000 per person(BUT if paid for an individual's medical and tuition expenses DIRECTLY to the school or hospital/medical provider then ALL($13,000 limit doesn't apply) is excludable). Once again, List any gift in excess of $13,000 per individual and then deduct all of the exclusions, such as, any gifts made to your spouse, medical and tuition expenses paid Directly to school/hospital, to charities, etc. Once those are deducted, you will compute your taxable gift and credit $345,800 since $1 million is non-taxable.

"I hate every minute of training, but I said, DON'T QUIT. Suffer now and live the rest of your life as a champion" - Muhammed Ali
FAR: 65(11/10), 80(02/11->Yaeger Audio!)
AUD: 73(05/15/11 Yaeger Homestudy), retake 76(08/31/11)
BEC: 73(08/05/11) Yaeger Homestudy, 71(11/30/11), retake 80(04/20/12)
REG: 80 (11/15/11) Yaeger Homestudy

[hopefulcpa28]

Thank you!! I really appreciate it!!

But why's there two different numbers? Credit and $1,000,000 exclusion? Are they the same thing?

[Yvonne570]

Btw Hopeful, you know a lot more than what I knew going into REG. I just had a really bad study week and focused to much on the law part – which I struggled. LOL.

AUD - Passed:)
FAR - Passed:)
REG - Retake TBD
BEC - Missed by 3 points Retake TBD

[gms361]

Here is an article that helped me understand the concept between the gift tax exemption (gifts made during your life) and the estate tax exemption. Previously, they have been two different figures, thus the credit (the tax on the exemption) you take on the gift tax return has been less than the credit taken on the estate tax return but for 2011/2012 they are the same number ($5m). This had me so confused b/c I thought the credits were unified and thus the same figure. Anyway, maybe this will help.

https://www.nytimes.com/2011/02/13/business/yourtaxes/13estate.html

AUD - 83
FAR - 78
BEC - 76
REG - 86 PTL!!!!!

Used CPAExcel & Wiley testbank (awesome by the way)

[jdj017400]

I know this thread is about a month old, but can anyone confirm the amounts that are currently being tested? I see the update from Becker listing the Exclusion at $5,000,000 and the credit at $1,730,800 (not the old $345,800 as hopefulcpa originally referred to).

According to Becker those amounts WOULD have been testable for November 2011 exam. I completely skipped Estates and Trusts my first time on Reg (11/30/2011)…which was a bad idea, because I got two simulations on them.

Now that I'm finally looking at the material, and set to retake 01/30/2012, all of the updates are confusing.

BEC - 80 (11/30/2010), Lost Credit - Retake 11/30/2012, 80 (FINISHED!)
AUD - 71 (05/31/2011), 79 (08/28/2011)
REG - 70 (11/30/2011), 87 (02/09/2012)
FAR - 61 (5/31/2012), 80 (08/31/2012)

[Working-Hard]

Yes, the 2012 edition states $1,730,800/ first $5M. Could you share a sample MC question on this topic?

[jdj017400]

@Working-Hard

I'm just now getting to the MCQs for Estate, using Becker 2011 (with the applied software update). Even with the software update, I just encountered my first MCQ regarding the the new amounts:

“CPA-01893

Assuming the tax law in effect for 2011, what amount of a decdent's taxable estate if effectively tax-free if the maximum applicable estate and gift tax credit is taken?

a. $13,000

b. $345,000

c. $1,000,000

d. $0

“

The correct answer is obviously $5,000,000, but it seems Becker has still yet to update 2011 correctly. I really hate Becker sometimes.

BEC - 80 (11/30/2010), Lost Credit - Retake 11/30/2012, 80 (FINISHED!)
AUD - 71 (05/31/2011), 79 (08/28/2011)
REG - 70 (11/30/2011), 87 (02/09/2012)
FAR - 61 (5/31/2012), 80 (08/31/2012)

[Working-Hard]

Thank you for the info …

I was thinking Becker bad until I bought Wiley and Gleim testbank. They're outdated, too.

I guess they do not have time go back and keep up with the rules every 6 months. 🙂

[Author]

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