Donor, D, died in 2011, owning property outright worth $6 million

Donor, D, died in 2011, owning property outright worth $6 million on the applicable valuation date (see IRC Sec. 2504(b)). D had made no lifetime transfers accorded estate tax significance and had no other significant interests or powers. Assume there will be no estate tax deductions. Prior to the date of death, D, who was single, made the following outright cash gifts to D’s Cousin, the only gifts D ever made:

December 25, 2004 $1,011,000
December 25, 2005 $511,000

(a) Using the current gift tax rates (see IRC Sec. 2502(a)), and the $1 million applicable credit amount available in 2004 and 2005, compute D’s gift tax liability in 2004 and 2005, and the federal estate tax liability for D’s estate. The annual exclusion was $11,000 in 2004 and 2005.

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