Natalie\'s estate includes the following assets: Accrued rents on the apartment
ID: 2456979 • Letter: N
Question
Natalie's estate includes the following assets:
Accrued rents on the apartment building are as follows: $60,000 (date of death) and $70,000 (six months later). In order to pay expenses, the executor of Natalie's estate sells the Green stock for $650,000 five months after her death.
a. If the § 2032 election is made, Natalie's gross estate includes $ ???
The value of the property on the date of its transfer generally determines the amount that is subject to the gift tax or the estate tax. Under certain conditions, however, an executor can elect to value estate assets on the alternate valuation date. The election is made by the executor of the estate and is irrevocable.
b. Assume the Green stock is sold for $650,000 seven months (rather than five months) after Natalie's death. If the § 2032 election is made, Natalie's gross estate includes $ 6440000
c. If the § 2032 election is not made, the gross estate includes $ 6560000
Fair Market Value Date of Death Six Months Later Apartment building $4,400,000 $4,380,000 Stock in Blue Corporation 1,200,000 1,300,000 Stock in Green Corporation 900,000 700,000Explanation / Answer
a. If the § 2032 election is made
Natalie's gross estate Amount ($)
Apartment building $ 4,380,000
Stock in blue corporation $ 1,300,000
Stock in green corporation $ 650,000
Accrued rent on apartment building $ 60,000
Gross estate Value $ 6,390,000
Note 1. if the executor opts for valuation under § 2032 election, the asset sold within 6 months after the decendent's death will be valued as of date of sale. Accordingly, we have valued stock of green coporation sold after 5 months of death at date of sale i.e $ 650,000
Note 2. if the asset is not sold or discarded it will be valued as of the date six month after the decendent death under § 2032 election. Accordingly we have valued other assets at the fair market value of six months after the date of death.
Note 3. Accrued rent was increased merely because of lapse of time, therefore we will take the value of accrued rent as of the date of death (instead of the later date ) i.e $ 60,000
b. if the § 2032 election is made and green stock is sold after seven month of decendant death .
Natalie's gross estate Amount ($)
Apartment building $ 4,380,000
Stock in blue corporation $ 1,300,000
Stock in green corporation $ 700,000
Accrued rent on apartment building $ 60,000
Gross estate Value $ 6,440,000
Note 1. if the executor opts for valuation under § 2032 election, the asset sold after 6 months from the decendent's death will be valued as of the date six month after the decendent death . Accordingly, we have valued stock of green coporation sold after 7 months at i.e $ 700,000 ( value on six months later)
Note 2. if the asset is not sold or discarded it will be valued as of the date six month after the decendent death under § 2032 election. Accordingly we have valued other assets at the fair market value of six months after the date of death.
Note 3. Accrued rent was increased merely because of lapse of time, therefore we will take the value of accrued rent as of the date of death (instead of the later date ) i.e $ 60,000
C. if election is not made under § 2032 election
Natalie's gross estate Amount ($)
Apartment building $ 4,400,000
Stock in blue corporation $ 1,200,000
Stock in green corporation $ 900,000
Accrued rent on apartment building $ 60,000
Gross estate Value $ 6,560,000
Note 1 if election is not made under § 2032 election then all the property in the estate will be valued as of the date of death
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