June made taxable gifts as follows: $200,000 in 1977, $600,000 in 1985, and $700,000 in 2001. In 2016, June dies leaving a taxable estate of $4,000,000. June's tax base for applying the unified tax rate schedules (for estate tax purposes) is:

Question

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To calculate the tax base for estate tax purposes, we start with the gross estate (in this case, $4,000,000) and add back any taxable gifts made during the decedent's lifetime.

In this case, June made taxable gifts of $200,000 in 1977, $600,000 in 1985, and $700,000 in 2001. We need to adjust these gifts for inflation using the applicable federal rate (AFR) for each year, which can be found on the IRS website.

Using the AFRs for each year, we get the following adjusted gifts:
- $200,000 in 1977 = $855,241 in 2016
- $600,000 in 1985 = $1,412,628 in 2016
- $700,000 in 2001 = $969,846 in 2016

Adding these adjusted gifts to the gross estate, we get:
$4,000,000 + $855,241 + $1,412,628 + $969,846 = $7,237,715

Thus, the tax base for applying the unified tax rate schedules is $5,500,000 (the 2016 estate tax exemption amount), which is answer choice D.

June Made Taxable Gifts as Follows: $200,000 in 1977, $600,000