Lesson 6: Adjustments to Gross Estate
This lesson focuses on understanding the adjustments made to the Gross Estate, which is crucial in determining the taxable estate.
1. Deductions from Gross Estate
Various deductions are allowed from the gross estate, including:
- Marital Deduction
- Recommended Book on Federal Estate Tax Law
- Charitable Deductions
- Recommended Book on Charitable Deductions
- Other applicable deductions
Marital Deduction
The marital deduction allows for an unlimited deduction for property that passes from the decedent to their surviving spouse. Refer to our detailed lesson on Marital Deduction for more information.
Charitable Deductions
Estates can deduct the value of property bequeathed to qualifying charitable organizations. More details can be found in our lesson on Charitable Deductions.
2. Debts and Expenses
Debts owed by the decedent and expenses related to the administration of the estate can also reduce the gross estate:
- Outstanding debts, including mortgages
- Funeral expenses
- Administrative expenses
3. State Death Taxes
State death taxes paid by the estate can be deducted from the gross estate. This is critical for estates subject to both federal and state estate taxes.
4. Adjusted Gross Estate
After accounting for all allowable deductions, the adjusted gross estate is calculated as follows:
Adjusted\ Gross\ Estate = Gross\ Estate - Deductions\ - Debts\ and\ Expenses - State\ Death\ Taxes
Example Calculation
Let's illustrate this with an example:
const grossEstate = 5000000; // $5,000,000
const maritalDeduction = 2000000; // $2,000,000
const charitableDeduction = 500000; // $500,000
const debtsAndExpenses = 300000; // $300,000
const stateDeathTaxes = 100000; // $100,000
const adjustedGrossEstate = grossEstate - maritalDeduction - charitableDeduction - debtsAndExpenses - stateDeathTaxes;
console.log(adjustedGrossEstate); // Output: $1,900,000