Question

When preparing the estate tax return of Fergus Cardby, the information available includes the items listed below. what amounts are included in Fergus's gross estate?

a. Fergus had lent his son, jasper, 20000 on a demand note, which was forgiven in his will.

b. fergus owned a life insurance policy on the life of his wife, yasmin, in the amount of 100000. replacement value was 300 when fergus died, but his estate collected 100000 since yasmin died 4 months later.

c. 19 years before, fergus deeded his daughter, honor, a summer house, now worth 70000. fergus spent 6 weeks a year there, until he died.

d. fergus owned stock in alternative motors, worth 15000 when he died, but it was worthless 5months later.

e. fergus owned 200000 of tax exempt municipalbonds.

Answer 1

a. The amount od 20000 shall be a part of Gross Estate as the same was owed to Mr Fergus at the time of Death

b. In case of life insurance of other persons, gross estate shall include only the replacement value i.e. 300 (Donaldson v. Commissioner, 31 T.C. 729 (1959))

c. The house shall not be included in the Gross estate since the same was given more than 3 years back and the same is irrovcable.

d. Generally, assets are included in the gross estate at their fair market value on the date of the decedent’s death. As an alternative, an alternate valuation date can be used—within six months of the decedent’s date of death. Whichever method is chosen, all assets must be valued on the same basis—either all at the date of death or all at the alternate valuation date. So in case valuation is done at the time of Death, 15000 shall be taken as value, while if valuation is done after 5 months, the worthless value shall be taken.

e. Stocks and bonds of any kind, whether issued by domestic or foreign corporations or governments, are includable in the gross estate, hence bonds worth 200000 shall be part of Gross estate.