In 2012, Katherine made some taxable gifts upon which she paid a Federal gift tax of $96,000. If Katherine dies in 2014, the $96,000 is included in her gross estate under the "gross up" rule.

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The "gross up" rule requires that any Federal gift taxes paid by the donor on taxable gifts made during their lifetime are added back to their gross estate for estate tax purposes. Therefore, if Katherine dies in 2014, the $96,000 she paid in Federal gift tax would be included in her gross estate calculation.

In 2012, Katherine Made Some Taxable Gifts Upon Which She