Section 13403 - Application of Exemptions or Exclusion(a) Specific Exemptions. The specific exemptions provided in Revenue and Taxation Code Sections 13801 to 13803, inclusive, come out of the lower rate brackets and the excess over the exemptions is taxed in the rate bracket or brackets where it would have been taxed had the exemption not been allowed (see Revenue and Taxation Code Section 13403). Consequently, if a parent dying in 1974 left a taxable estate of $50,000 distributed to a minor child, the $12,000 specific exemption then provided under Revenue and Taxation Code Section 13801 is applied to the first rate bracket leaving $13,000 taxable at the first rate bracket (3 percent), and $25,000 taxable at the second rate bracket (4 percent). Likewise if a parent dying in 1981 leaves a taxable estate of $50,000 passing to a minor child the $40,000 specific exemption provided by Section 13801, amended and effective as to decedents dying on and after January 1, 1981, is applied to the first rate bracket as to $25,000 and to $15,000 in the second rate bracket leaving $10,000 taxable at the second rate bracket (4 percent).(b) Separate Property Exemption or Exclusion Between Spouses. (1) Decedents Dying on or After January 1, 1976 and Prior to January 1, 1981. The marital exclusion of separate property provided by Revenue and Taxation Code Section 13805, as amended and made effective as to decedents dying on or after January 1, 1976, and prior to January 1, 1981, is excluded from the clear market value of the estate before applying any of the tax bracket rates. Consequently, if a spouse dies in 1976 with a separate property estate of $150,000 passing to the surviving spouse, $75,000 (one-half of the separate property then provided under Revenue and Taxation Code Section 13805) is excluded. The balance of $75,000 is subject to the $60,000 specific exemption then provided under Revenue and Taxation Code Section 13801 to be taken out of the first three rate brackets leaving $15,000 taxable at the third rate bracket (6 percent).(2) Decedents Dying Prior to January 1, 1976. The marital exemption under Revenue and Taxation Code Section 13805, applying with reference to separate property of a deceased spouse dying prior to January 1, 1976, comes out of the lower tax rate brackets. The excess over this and the specific exemption under Revenue and Taxation Code Section 13801 is taxed in the rate bracket or brackets where it would have been taxed had the exemption not been allowed. Consequently if a spouse dies in 1974 with a separate property estate having a clear market value of $150,000 passing to the surviving spouse, the $5,000 specific exemption (Revenue and Taxation Code Section 13801 prior to January 1, 1976) and the $75,000 marital exemption (Section 13805 prior to January 1, 1976) are applied to the first and second rate brackets as to the first $50,000 of the total exemptions allowable. The balance of the allowable exemptions ($30,000) is applied to the third rate bracket leaving $20,000 taxable in the third rate bracket and $50,000 taxable in the fourth rate bracket.Cal. Code Regs. Tit. 18, § 13403
1. Amendment filed 7-2-81; effective thirtieth day thereafter (Register 81, No. 27). Note: Authority cited: Section 14740, Revenue and Taxation Code. Reference: Section 13403, Revenue and Taxation Code.
1. Amendment filed 7-2-81; effective thirtieth day thereafter (Register 81, No. 27).