Estate Planning, R16

EOC Problem #3, part b in CFAI: Relative value of gift versus the bequest. Gift is worth more because the grandson’s marginal tax rate on investment income is 25%, versus 30% for the donor’s (Halls). Where in the problem does it say the Halls are subject to a 30% tax rate on investment income? The estate will be taxed at 30% (either now or in 5 years), but that’s not applicable to the investment gains?

Yes, no mention that the Halls is subject to a 30% tax rate on investment income. Its better to send inquiry to CFAI to clarify this. This kind of error is not uncommon in CFAI’s text.