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of section 2040, petitioner primarily relies on the Court of
Appeals for the Ninth Circuit's decision in Propstra v. United
States, 680 F.2d 1248 (9th Cir. 1982), where a fractional
interest discount was allowed for community property under
section 2033.
In Propstra, the Ninth Circuit upheld a 15-percent discount
in the value of the decedent's undivided one-half interest in
real property held as community property. Id. at 1253. The
court noted that the Federal estate tax is an excise tax, levied
on the privilege of transferring property at death. Id. at 1250
(citing Estate of Bright, 658 F.2d 999, 1001 (5th Cir. 1981)).
The amount to be taxed is valued by the property actually
transferred, rather than what is owned by the decedent before
death, or the interest held by the legatee after death. Id. The
Government argued that under a unity of ownership theory, a
fractional interest discount was inapplicable because "one can
reasonably assume that the interest held by the estate will
ultimately be sold with the other undivided interest and that
interest's proportionate share of the market value of the whole
will thereby be realized." Id. at 1251. After considering the
language of section 2031 and section 2033, the court was
unwilling to impute "unity of ownership" principles for valuation
purposes. Id. Further, the court looked at the "willing seller"
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