To: Alex Lee
Date: September 23, 2012
Subject: Alternative Minimum Tax
Good to hear from you Alex. Estate and gift tax can be a burden so let me help you clear the air and give you a fresh take on what to do. First I’m going to want to explain to you the estate tax formula. Then I will discuss the interplay between gift and estate taxes. I have a few strategies for you to minimize estate taxes that I can let you in on and will help you on the long run. I would also like to explain the generation-skipping transfer tax and its relationship to gift and estate tax, because this might relate to you. From all this I will give you my advice on whether to invest in your son and his business idea.
I would like to explain the estate tax formula and how it is computed. The first step is to gather or compile the gross estate and that consists of all the property in which you have an interest in. This would be the total dollar value of all the property and assets you have at the time of your death. The gross estate figure will be before liabilities like debt and taxes are deducted. The next step will be to subtract all the debt, funeral, and administration expenses. This will give you the adjusted gross estate. We would then normally subtract the property passing to the surviving spouse. In your case, your spouse no longer plays a factor but that may come to play if you decide to remarry and include your possible future spouse in your will. After we have taken out these items we would come up with your taxable estate. We will have to add the adjusted taxable gifts. This would be the excess of $13,000 annual gift exclusion amount. Under some special circumstances, if the gift was included in the gross estate it would not have to be reported again. Once this is done we will have you estate tax base. We then can find your tentative estate tax from the tax table. Our next step would be to subtract gift taxes...