(1)
Introduction. This rule applies to deaths occurring on or after
May 17, 2005, and discusses how to apportion the estate tax when there is
out-of-state property included in the gross estate. The estate tax rule on
apportionment of estate tax for deaths occurring on or before May 16, 2005, can
be found in WAC
458-57-025.
(2)
Calculation of apportioned
tax. Apportionment of the tax is allowed for estate property located
outside of Washington, even if the other state where the out-of-state property
is located does not impose an estate tax. The amount of tax is determined by
multiplying the preapportioned tax using Table W by a fraction. The numerator
of the fraction is the value of the property included in the decedent's gross
estate that is located in Washington. The denominator of the fraction is the
value of the decedent's gross estate. Intangible property is located in
Washington if the decedent was a resident of this state at death. Property
qualifying for the farm deduction is excluded from the numerator and
denominator of the fraction. See WAC
458-57-155, Farm deduction, for
additional information.
(a)
Example -
Washington resident decedent. A widow dies during 2014 leaving a gross
estate of $4.1 million. The decedent was a Washington resident at death.
Decedent's primary residence is located in Seattle, Washington. The decedent
also owned a second home in Arizona valued at $300,000 and unimproved real
property in South Dakota valued at $750,000. The estate had $100,000 in
expenses deductible for federal estate tax purposes. The applicable exclusion
amount for 2014 after adjustment for inflation is $2,012,000.
Under the facts of this example the estate owes Washington
estate tax on a Washington taxable estate of $1,988,000, computed as shown
below:
| Gross estate: |
$4,100,000 |
| Less allowable deductions: |
($100,000) |
| Less applicable exclusion amount: |
($2,012,000) |
| Washington taxable estate: |
$1,988,000 |
The preapportionment Washington estate tax for this estate,
using the table provided in WAC
458-57-115(3)(a),
equals $238,320, computed as follows: $100,000 + ($988,000 x
14%)=$238,320.
Because the decedent owned out-of-state property, a house in
Arizona and unimproved real property in South Dakota that are not subject to
Washington estate tax, the tax due to Washington is calculated by multiplying
the amount of preapportionment tax computed above by the fraction described in
this subsection (2). Also, because the decedent was a Washington resident at
death, the numerator of the fraction is the value of all property included in
the decedent's gross estate that is located in this state, including the
decedent's intangible personal property. The denominator of the fraction is the
value of the decedent's gross estate. Using the facts in our example, the tax
owed to Washington equals $177,287, computed as follows: (($4,100,000 -
$1,050,000)/ $4,100,000) x $238,320=$177,287.
(b)
Example Nonresident
decedent. A widow dies during 2013 leaving a gross estate of $6 million.
The decedent was a Colorado resident at death and all of the decedent's
property is located in that state, except for a vacation home located in
Washington valued at $650,000. The estate had $100,000 in expenses deductible
for federal estate tax purposes. The applicable exclusion amount for 2013 is
$2,000,000.
Under the facts of this example, the estate owes Washington
estate tax on a Washington taxable estate of $3,900,000, computed as shown
below:
| Gross estate: |
$6,000,000 |
| Less allowable deductions: |
($100,000) |
| Less applicable exclusion amount:
|
($2,000,000) |
| Washington taxable estate: |
$3,900,000 |
The preapportionment Washington estate tax for this estate,
using the table provided in WAC
458-57-115(3)(a),
equals $534,000, computed as follows: $390,000 + ($900,000 x
16%)=$534,000.
Because the decedent owned property located outside Washington,
the tax due to Washington is calculated by multiplying the amount of
preapportionment tax computed above by the fraction described in this
subsection (2). Also, because the decedent was not a Washington resident at
death, the numerator of the fraction does not include the value of decedent's
intangible personal property. The denominator of the fraction is the value of
the decedent's gross estate. Using the facts in this example, the tax owed to
Washington equals $57,850, computed as follows: ($650,000/$6,000,000) x
$534,000=$57,850.
(3)
When is property located in
Washington? The location of property owned by the decedent is determined
at the time of death.
(a) All real property
physically situated in this state, with the exception of federal trust lands,
and all interests in such property, is located in Washington. Interests in real
property include, but are not limited to:
(ii) Decedent's beneficial interest in real
property held in trust; and
(iii)
Decedent's interest in jointly owned property (e.g., tenants in common, joint
with right of survivorship).
(b) Tangible personal property of a decedent
is located in Washington if:
(i) At the time
of death the property is situated in Washington; and
(ii) It is present for a purpose other than
transiting the state.
(c) Intangible personal property of a
decedent is located in Washington if the decedent was a resident of this state
at death.
(d)
Example.
A nonresident decedent was a construction contractor doing business as a sole
proprietor. The decedent was constructing a large building in Washington. At
the time of death, any of the decedent's equipment that was located at the job
site , such as tools, earthmovers, bulldozers, trucks, etc., is located in
Washington for estate tax purposes because that property was present in the
state for a purpose other than transiting the state.
