Quinn made taxable gifts of $4,500,000 (after annual exclusions) in 2011. In December of the current year, he passed away leaving a taxable estate of $15,000,000. What is the tax on Quinn's estate if the gifts made in 2011 were his only prior taxable gifts?

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The taxable estate is $15,000,000, and the $4,500,000 in gifts made in 2011 are added back to the estate, giving a total of $19,500,000. The estate tax rate for this amount is 40%, resulting in a tax of $7,800,000. However, there is a credit for the gift tax paid on the previous gifts, which is $2,044,000 ($4,500,000 - $1,000,000 annual exclusion = $3,500,000 taxable gift x 0.55 gift tax rate). This credit is applied against the estate tax, resulting in a net tax of $5,756,000, or choice C.

Quinn Made Taxable Gifts of $4,500,000 (After Annual Exclusions) in 2011