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    Estate Tax Liable

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    Two years ago, Herbert, a widower, made a gift of marketable securities to his 35-year-old daughter, Sabrina, on which he paid a Federal gift tax of $3 million. Herbert dies in the current year and his estate is greatly reduced in value due to his having given away most of his assets over his lifetime. Herbert's executor files an estate tax return showing a gross estate of slightly more than $3 million. The estate tax of $1 million that is attributable to the $3 million is not paid because the estate has no liquid assets. The IRS assesses the $1 million estate tax against Sabrina under the rules relating to transferee liability. Is Sabrina liable for the estate tax?

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    Solution Preview

    Yes.

    From the Internal Revenue Code:

    5.5.7.7 (06-23-2005)
    Fiduciary Transferee Liability

    1.

    Under 31 U.S.C. § 3713, the personal representative of an estate (a fiduciary) is personally liable to the extent of payments or distributions that are made before paying a claim of the government.
    2.

    If it is not possible to collect by enforcing the estate tax lien or the assessment lien against assets of the gross ...

    Solution Summary

    The solution determines if Sabrina is liable for estate tax on her assets.

    $2.19

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