Federal Unified Credit for 2013

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The recent passage of the American Taxpayer Relief Act (ATRA) of 2012 enacted major estate and gift tax reform, and a certain sense of permanence for estate tax planners.

The ATRA maintained the unification of the estate tax exemption amount and the gift tax exemption amount. This amount continues to be indexed for inflation [IRC §2010(c)(3)(B)].

Here is a summary of the exemption amounts, and the equivalent unified credit amounts for both the estate tax and the gift tax:

Years Exemption Amount Unified Credit
2011 $5,000,000 $1,730,800
2012 $5,120,000 $1,772,800
2013 $5,250,000 $2,045,800

In Rev. Proc. 2013-15, §2.13, the IRS confirmed that the basic exclusion amount against estate tax under §2010 for an estate of any decedent dying during calendar year 2013 (and by extension, the unified credit against gift tax under §2505) is $5,250,000.

See: IRS Rev. Proc. 2013-15

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Valuation of Marketable Stocks & Bonds

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If you make gift of stocks or bonds, your brokerage statement shows the value of the securities transferred out. Or if the securities went to a charity, the charity may report a value of the securities received (or the proceeds if the securities were sold). However, what value does the IRS want you to use when you report the transfer?

In general, the answer is that the IRS wants you to use the Fair Market Value of the securities on the day they were transferred. For closely held securities, an appraisal may be required. For securities regularly traded on a public market, the Treasury regulations provide us with specific guidance.

Gifts of Stocks & Bonds

Treasury Reg. §25.2512-2(b)(1) directs that the valuation of stocks & bonds gifted must be reported on a gift tax return using “the mean between the highest and lowest quoted selling prices on the date of the gift is the fair market value per share or bond.”

The regulations continue to provide direction for valuation of stocks & bonds when the securities were not traded on the date of gift.

Bequests of Stocks & Bonds

When a security is included in the gross estate of a decedent, Treasury Reg. §20.2031-2(b)(1) contains language almost identical to the gift tax regulations: “the mean between the highest and lowest quoted selling prices on the date of the gift is the fair market value per share or bond.”

Charitable Deduction Valuation

IRC §170 and the regulations thereunder are silent as to the valuation of stocks & bonds, other than to permit a charitable deduction for the “fair market value” (see §1.170A-1(c)(2)). But because charitable deductions can be viewed as gifts to charitable organizations, the gift tax regulations (above) regarding the valuation of marketable securities should be used to value charitable gifts.

Federal Unified Credit for 2012

For information on the 2013 Federal Unified Credit , click here.


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When the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312) was signed into law December 17, 2010, it made a number of  important estate and gift tax changes including:

  1. it reunified the Federal estate tax exemption and the lifetime gift tax exemption [P.L. 111-312 §302(b)(1)];
  2. it raised this exemption to $5m [P.L. 111-312 §302(a)(1) amending IRC §2010(c)]; and
  3. it indexed this amount for inflation [P.L. 111-312 §302(a)(1) & §302(a) adding IRC §2010(c)(3)(B)].

This may be the first time that the unified credit was ever indexed; unfortunately this provision will expire at the end of 2012 (unless there is Congressional action).

In Rev. Proc. 2011-52 (November 7, 2011; IRB 2011-45), §3.29, the IRS announced that the basic exclusion amount against estate tax under §2010 for an estate of any decedent dying during calendar year 2012 (and by extension, the unified credit against gift tax under §2505) is $5,120,000.

At current gift and estate tax rates, the basic exclusion amount is equivalent to a unified credit of $1,772,800. For quick reference, the amount of unified credit for the past 10 years is summarized here:

Years Unified Credit
2002 through 2010 $330,800
2011 $1,730.800
2012 $1,772,800

Reference:

IRS Rev. Proc. 2011-52

IRS Publication 950, Introduction to Estate and Gift Taxes