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At the time of his death on August 7, Michael owned the following assets. Green

ID: 2598115 • Letter: A

Question

At the time of his death on August 7, Michael owned the following assets.


Green Corporation stock (cost $700,000, FMV $950,000). On July 20, Green declared a cash
dividend, payable on August 17 to all shareholders as of the record date of August 8. Michael’s
executor receives the $64,000 dividend on the scheduled payment date.


Note receivable (face amount $600,000) payable on demand. The note was received by
Michael two years previously from his daughter Addison. Addison used the loan to start a
business which currently is very successful. In his will, Michael forgives the note.


How much, as to these transactions, is included in Michael’s gross estate?

Explanation / Answer

Fair market value of Green stock + Notes receivable

= $950,000+$600,000

= $1,550,000 should be included in the gross estate.

Dividend should not be included in the gross estate because the record date is after the death of Michael.