Question

Paolo Ferrari died in 2012, leaving an estate of $21,000,000. Paolo’s wife died in 2009. In 2009, Paolo gave his son property that resulted in a taxable gift of $4,000,000 and upon which Paolo paid $950,000 in transfer taxes. Paolo had made no other taxable gifts during his life. Paolo’s will provided a charitable bequest of $500,000 to his town’s historical society.

Answer 1

The subject of this question is Business. Paolo Ferrari's taxable estate for estate tax calculation purposes would be $16,500,000. The estate tax only applies to inheritances over $5.25 million in 2013, and it is calculated on a per-person basis.

Step-by-step explanation:

The subject of this question is Business. It involves the calculation and understanding of the estate tax based on the given information.

In 2013, the estate tax only applied to inheritances over $5.25 million, meaning only a small percentage of individuals with significant wealth were subject to this tax.

In Paolo Ferrari's case, his estate is valued at $21,000,000. However, since he left a charitable bequest of $500,000 and made a taxable gift of $4,000,000 in 2009, the taxable estate for estate tax calculation purposes would be $16,500,000 (calculated as $21,000,000 - $500,000 - $4,000,000).

Based on the given information, it is not specified whether Paolo's wife made any taxable gifts during her lifetime. Therefore, it is important to note that the estate tax exclusion is applicable on a per-person basis. This means that Paolo's wife would have her own exemption ($5.25 million in 2013) that would not be affected by Paolo's gifts or bequests.