Response to the following problem:
Clay, who was single, died in 2012, and had a gross estate valued at $8500. 6 months after his death, the gross assets are valued at $9000. The estate incurs funeral and administrative expense of $125,000. Clay had debs amounting to $150,000 and bequeathed all of his estate to his children. During his life, Clay made no taxable gifts.
1. What is the amount of Clays taxable gift?
2. What is the tax base for computing Clays estate tax?
3. What is the amount of estate tax owed is the tentative estate tax (before credits) is $2,859,550?
4. Alternatively, is 6 months after his death, the gross assets in Clays estate declined in value to $7500, can the administrator of Clays estate elect the alternate valuation date? What are the important factors that the administrator should consider as whether the alternate valuation date should be elected?