The Mathematics of Money

Copyright © 2008, The McGraw-Hill Companies, Inc.

c. Someone who dies leaving a taxable estate of $60,000.

d. Someone who dies with no assets at all.

C. Grab Bag

18. Suppose that a state imposes taxes of $2.45 per pack on cigarettes in addition to a sales tax of 7.5% of the retail price.
    If a pack of cigarettes costs $1.93 before taxes, what would the price be, including taxes?


19. On December 31, 2009, Junius is taken to the hospital with a severe and life-threatening illness. Despite the best efforts
    of his physicians, near the stroke of midnight he passes away, leaving a taxable estate of $12,700,000. (a) For the tax
    rates given in this section, what would the estate tax be on this amount if he died at 11:59 P.M.? (b) What would the
    estate tax be if he died 2 minutes later?


20. Calculate the estate tax due on a taxable estate of $237,000, assuming a 2008 date of death.


21. Suppose that the import duty on perfume is $1.25 for up to 5 milliliters, and $0.85 for each additional 5 milliliters or
    portion thereof. Calculate the duty on a 17-millilter bottle of perfume.


22. Sheila gave each of her three grandchildren $14,575 in 2006. How much of her gift is potentially subject to gift tax?
    How much did she have to pay in gift tax when she made these gifts?


23. Suppose that there is a state excise tax on long-distance service of 75 cents monthly plus $0.0025 per minute of
    use. Determine the excise tax that would be charged for someone whose long-distance use in the month of June was
    817 minutes.


24. Suppose that there is an import duty in place for imported automobiles. The duty is $350 plus 7½% of the purchase
    price. If you import a high-performance car that cost $58,935, how much would the import duty amount to?

D. Additional Exercises

25. At the 2007 estate tax rates, how large of a taxable estate would you need to leave to owe $1,000,000 in estate taxes?
    What percent of your taxable estate would this tax represent?


26. The estate tax rate for 2008 is scheduled to be 45%. Of course the rate is not really 45% of the entire estate because of
    the exemption amount.

How large of a taxable estate would someone have to leave in order for federal estate taxes to total:

a. 25% of the total taxable estate

b. 35% of the total taxable estate

c. A full 45% of the total taxable estate

Exercises 9.4 413