Example 1

This computation is a series of steps that leads to a computation with a marital deduction payable out of residue and interest computed on both federal and state tax liabilities.

The data for this computation is simple:

1. Date of Death: 12/15/94
2. Gross Estate: $3,00,000.00
3. Sch. JK&L expenses: $250,000
4. Specific bequest to spouse: $35,000
5. Percentage of residue to spouse: 50%
6. Specific bequest to Other than spouse before residue: $1,000,000
7. The State Death Tax Credit Controls the computation of the state tax.
8. Both state and federal taxes are charged to residue.
9. Payment to IRS on due date: $500,000.
10. Payment to State on due date: $100,000.
11. Interest is computed to 12/31/95

Step 1

Open the program by double clicking on the icon.

Step 2

Check to see if the initial options are set as you want.

Do this by selecting the Options menu looking at the initial case settings dialog box. Mine is set to AutoCompute, Rounding to the nearest cent, and the Guess method of computation. Once these setting are correct click the OK button and you are ready to create a new case file.

Step 3

Click on the File menu and select the New option. The New dialog box has a list box showing that it can create either a Case File or an Interest Table. If Case File is not selected, select it by clicking on it with your mouse. When Case File is selected, click on the OK button and a new case file will be created.

Step 4

If you cannot see all the information displayed in the document view window, you should maximize the window by clicking on the Maximize button. It is one of the buttons on the right of the title bar. If you can see the full width of the information displayed, you do not need to maximize this window.

Step 5

Enter some basic information. Click on the General button on the Case Bar to the left of the DeskTop. This will bring up the General Tab Sheet with the General Tab Page selected. Enter the date of death as "12/15/94". Then hit Tab to move to the Decedent's Name edit box and enter "Joe Blow". Hit Tab to move the the memorandum edit box and enter "First sample computation". Hit Tab to move to the gross estate edit box and enter "3,000,000". Hit Tab to move to the JK+L before interrelated items edit box and enter "250,000". At this point hit Enter to leave this dialog box and return to the main output screen.

You will notice that at this point the output screen shows around 13 lines of output with the federal estate tax being shown as $805,500.00. If AutoCompute was not turned on you will have to click on the Compute button on the Case Bar to the left of the DeskTop to complete the computation.

At this point you can see how the output view can be changed. When a case file is created or loaded it always starts using the Summary View. This is a short view that can always fit on available window space in full. This is good as a starter, but I usually change this to the Standard view. Change the view of the output window to the standard view. There are two ways to do this. The fastest is to click on the Standard View button on the Tool Bar. The other way is to go to the View menu and select Standard Case View. The output screen now has more data on it. Some of the lines show zero amounts. You will probably have to scroll up and down to see all of the output data.

Step 6

The next thing to to is to name and save this file. You can get to the Save As Dialog box three different ways. Click the Save Button on the Tool Bar, From the File menu select Save, or from the File menu select Save As. Save the file under the name "Sample1" by entering that name in the File name edit box and hitting return.

Notice that the name on the title bar has changed to "Sample1" showing that the new name was accepted.

Step 7

We will next enter a simple marital deduction. Click on the Deduct button on the Case Bar to the left of the DeskTop. this will bring up the Deductions Tab Sheet with the Marital Tab Page already selected. Enter the Specific Bequests to the Surviving Spouse as "35,000.00". Then hit Tab to move the Bequests from Residue edit box and enter "50" to represent 50% of residue. Next click on the Residue Tab to go to the Residue Tab Page. In the edit box for total specific bequests before residue enter "1,000,000". Hit Enter to accept all data entered so far.

You will need to use the PgUp and PgDn keys to view the output window in full. It now shows a net federal tax of $541,855.35 with a marital deduction of $621,572.32. In the residue computation you should note that residue was reduced by the $1,000,000 specific bequests entered in the residue plus the $35,000 specific bequests entered in the marital deduction section. The amount entered in the residue section did not include the specific bequests to the marital bequest or the charitable bequest. Notice that the residue was not reduced by state death taxes because they were not computed.

Step 8

Next we will tell Inter-Est to compute the state death taxes for one state based upon the full state death tax credit. Click on the States button on the Case Bar to the left of the DeskTop. When the State Input Screen appears, click on the Add State button. In the State Description & Method dialog box that appears, I enter the name of the state, "Texas". The method of tax computation is already set at "State Death Tax Credit, All", so all I need to do is hit Enter. This will return me to the State Input Screen. Here I click on the Close button and return to the output screen.

In the output window the state death tax credit of $114,337.75 is now used to reduce residue and the marital deduction is now $549,337.75.

Step 9

Next we will tell Inter-Est to compute the federal interest and use it as a Schedule J deduction in the computation. Click on the Fed Int button on the Case Bar to the left of the DeskTop. This will place us in the Federal Interest Input dialog box. Select "Compute Interest" and "Use all accrued interest". We will now enter the payment with the return and a computation date. Click on the Period Data button. This will bring you to the Interest Period Data dialog box. Double Click on the 9/15/95 period line in the list box. This will bring you to the Interest Period Data dialog box for the due date. Hit Tab once to move to the Tax Payment edit box and enter "500,000". Hit Enter to accept this entry and return to the Interest Period Data dialog box. Double click on the second interest period line in the list box and this will bring you to the Interest Period Data dialog box for the computation date. We will compute interest to 12/31/95 so for the period date enter "12 31 95". Hit Enter to accept this entry and return to the Interest Period Data dialog box. Click on the Close button to return to the Federal Interest Input dialog box. Click on OK to accept the changes made to this point.

At this point there is a deduction for federal interest in the amount of $1,883.19. This amount is not used to reduce residue because of Rev. Rul. 93-48, but if you wanted to reduce residue by this amount you would have to use the Complex Option.

Step 10

For our last step in the sample computation, we will deduct the interest charged by the state of Texas. Click on the States Button on the Case Bar to the left of the DeskTop. When the State Input Screen appears, click the Change Data Button. This brings us to the State Description & Method dialog box again. Click on the State Interest button to go the the State Interest dialog box. This is similar to the Federal Interest Input dialog box. Select "Compute Interest" and "Use all accrued interest".

There is one additional step that you must do here. Because Inter-Est did not supply a default interest table for the state, you must select an interest table to be used. Click on the Change Interest Table button. Select the Texas1 Interest Table by typing the name in the File name edit box and hitting Enter or double clicking on the Texas1 icon. When you return to the State Interest dialog box, the name of this interest table should be displayed to the right of the Change Interest Table button.

We will now enter the payment with the return and a computation date. Click on the Period Data button. This will bring you to the Interest Period Data dialog box. Double Click on the 9/15/95 period line in the list box. This will bring you to the Interest Period Data dialog box for the due date. Hit Tab once to move to the Tax Payment edit box and enter "100,000". Hit Enter to accept this entry and return to the Interest Period Data dialog box. Double click on the second interest period line in the list box and this will bring you to the Interest Period Data dialog box for the computation date. We will compute interest to 12/31/95 so for the period date enter "12 31 95". Hit Enter to accept this entry and return to the Interest Period Data dialog box. Click on the Close button to return to the State Interest dialog box. Click on OK to accept the changes made to this point. In the State Description & Method dialog box click the OK button. This will return me to the State Input Screen. Here I click on the Close button and return to the output screen.

At this point there is a deduction for state interest in the amount of $513.59 and a deduction for federal interest in the amount of $1,875.84. The marital deduction is now 550,113.13.

Step 11

We have finished this computation. It is time to save the final version. Click the Save Button on the Tool Bar or from the File menu select Save. As you gave the file a name in step 6 you do not need to do that again.

We have completed a simple computation with a marital deduction out of residue and with state and federal interest claimed as a deduction in the computation of tax. As you can see, the computation was not automatic, but the steps were simple and follow a logical pattern that should not be too hard to remember.

Program Output

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Cecil Cammack, Jr. dba
Cammack Computations Co.
P. O. Box 725, Cleburne, TX 76033
Voice: 1 (800) 594-5826
Email: cammack@inter-est.com
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