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Felipe will incur a $1 million Federal transfer tax when he passes a plot of...

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Accounting

Felipe will incur a $1 million Federal transfer tax when he passes a plot of land to Barbara, an unrelated friend. Felipes after-tax rate of return on his real estate investments is 3%. Compute the present value of the transfer tax if:

a. Felipe transfers the land to Barbara as a lifetime gift today.

b. Felipe transfers the land to Barbara through his will after his death 20 years from now.

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