1) I am not sure I would like to hire them as clients but I could do a
consult. It is seeming odd two people who do not like each other
would be willing to do this, but it may be the last attempt at getting a
resolution without facing the consequences of not filling estate taxes
in time. At the time of Death Ernie's fortune was valued at 20 million.
"Once you have accounted for the Gross Estate, certain deductions
(and in special circumstances, reductions to value) are allowed in
arriving at your Taxable Estate.” (IRS, n.d) It sounds like the wife is
getting at least half of the estate because Ernie and Wendy's state of
residence gives the surviving spouse an elective 50% share of the
estate of any married decedent regardless of what the will says.
Wendy would have no tax liability if the estate was transferred to her.
"The marital deduction is unlimited; the state does not owe any
federal estate taxes if all the items includible in the gross estate (or all
items except an amount equal to the basic exclusion amount) pass to
the surviving spouse." (Anderson, 2023) If the hand written note from
dinner is found to have merit, and the estate including the working oil
interests which is valued at $20 million on his date of death. If Donna
decided to keep all the money for herself, she may face an estate tax
liability. The law states "The Tax Cuts and Jobs Act of 2017 increased
the unified credit to $4,417,800, the tax on a basic exclusion amount
of $11.18 million." (Anderson, 2023) I would then ask if she planned
to make any charitable deductions with the remaining estate. If she
did not, she could face tax on 8.2 million above the exclusion amount.
Donna would then have a tax liability of 3.528 million.
2) The best-case scenario should they both decide to reach a
settlement of 50% of the estate to each party there would be no tax
implication as it would be under the 11.18 million thresholds set by
the Tax Cuts and Jobs Act of 2017.
3) I do not think it is a conflict of interest to represent both on tax
engagements. I know that it would not be pertinent to talk about one
or the other's financial situation without permission from either party.
4) With the price of oil falling and the estate losing its value at the
valuation date there would still be no tax liability for either party
should they choose to split the estate.
References:
Anderson, Kenneth and Hulse, David and Rupert, Timothy Pearson
(2023) Taxation 2023 Corporations, Partnerships, Estates &
Trusts Retrieved on:
https://plus.pearson.com/courses/c5bbf0f3f5514da496e7aa394b97
0921_d2l_snhumlp/products/173542/pages/589?locale=&isTpi
=Y&redirectURL=https://plus.pearson.com/bookshelf&use
rPreferredType=read
Estate tax. Internal Revenue Service. (n.d.). Retrieved April 27, 2023,
from https://www.irs.gov/businesses/small-businesses-self-
employed/estate-tax
