If the amount of federal estate tax due on an estate valued

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If the amount of federal estate tax due on an estate valued

by BTGmoderatorAT » Mon Feb 12, 2018 8:47 pm

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If the amount of federal estate tax due on an estate valued at $ 1.35 million is $ 437,000 plus 43 percent of the value of the estate in excess of $ 1.25 million, then the federal tax due is approximately what percent of the value of the estate?

A. 30%
B. 35%
C. 40%
D. 45%
E. 50%

I'm confused how to set up the formulas here. Can any experts help?

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EconomistGMATTutor: GMAT Instructor; Posts: 555; Joined: Wed Oct 04, 2017 4:18 pm; Thanked: 180 times; Followed by:12 members

by EconomistGMATTutor » Tue Feb 13, 2018 3:05 am

ardz24 wrote:If the amount of federal estate tax due on an estate valued at $ 1.35 million is $ 437,000 plus 43 percent of the value of the estate in excess of $ 1.25 million, then the federal tax due is approximately what percent of the value of the estate?

A. 30%
B. 35%
C. 40%
D. 45%
E. 50%

I'm confused how to set up the formulas here. Can any experts help?

Hi ardz24.

Let's take a look at your question.

The value of the state is $1,350,000. Hence, it exceeds by $100,000 (because $1,350,000 - $1,250,000 = $100,000).

Now, the state has to pay $$437,000+100,000*43\%=437,000+100,000\cdot\frac{43}{100}=437,000+43,000=480,000.$$ Finally, the percentage is approximatily $$\frac{480,000}{1,350,000}\cdot100=\frac{480}{1,350}\cdot100\approx35.5\%.$$ This implies that the correct answer is the option B.

I hope it helps you.

I'm available if you'd like a follow-up.

Regards.

GMAT Prep From The Economist
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EconomistGMATTutor: GMAT Instructor; Posts: 555; Joined: Wed Oct 04, 2017 4:18 pm; Thanked: 180 times; Followed by:12 members

by EconomistGMATTutor » Tue Feb 13, 2018 3:06 am

ardz24 wrote:If the amount of federal estate tax due on an estate valued at $ 1.35 million is $ 437,000 plus 43 percent of the value of the estate in excess of $ 1.25 million, then the federal tax due is approximately what percent of the value of the estate?

A. 30%
B. 35%
C. 40%
D. 45%
E. 50%

I'm confused how to set up the formulas here. Can any experts help?

GMAT Prep From The Economist
We offer 70+ point score improvement money back guarantee.
Our average student improves 98 points.

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Scott@TargetTestPrep: GMAT Instructor; Posts: 8085; Joined: Sat Apr 25, 2015 10:56 am; Location: Los Angeles, CA; Thanked: 43 times; Followed by:29 members

by Scott@TargetTestPrep » Wed Feb 14, 2018 10:19 am

ardz24 wrote:If the amount of federal estate tax due on an estate valued at $ 1.35 million is $ 437,000 plus 43 percent of the value of the estate in excess of $ 1.25 million, then the federal tax due is approximately what percent of the value of the estate?

A. 30%
B. 35%
C. 40%
D. 45%
E. 50%

The tax due is:

437,000 + 0.43(1,350,000 - 1,250,000)

437,000 + 0.43(100,000)

437,000 + 43,000 = 480,000

Thus, the tax due is:

480,000/1,350,000 = 48/135 â‰ˆ 0.35, or 35 percent of the value of the estate.

Answer: B

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