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Regs. Section 2044(a) includes in the gross estate the value of
property in which the decedent had a qualified income interest
for life and for which a marital deduction was allowed to the
estate of a predeceased spouse under section 2056(b)(7) (QTIP
property). Accordingly, at the death of the second spouse, QTIP
property is taxed as part of the surviving spouse's estate.
Sec. 2044(c).
Property includable in the gross estate is generally
included at its fair market value on the date of a decedent's
death. Sec. 2031(a); sec. 20.2031-1(b), Estate Tax Regs. Fair
market value is defined as the price that a willing buyer would
pay a willing seller, both persons having reasonable knowledge of
all of the relevant facts and neither person being under a
compulsion to buy or sell. United States v. Cartwright, 411 U.S.
546, 551 (1973); sec. 20.2031-1(b), Estate Tax Regs. The willing
buyer and the willing seller are hypothetical persons, rather
than specific individuals or entities, and the individual
characteristics of these hypothetical persons are not necessarily
the same as the individual characteristics of the actual seller
or the actual buyer. Propstra v. United States, 680 F.2d 1248,
1252 (9th Cir. 1982). The issue in this case is whether FOH
shares in the Harriett trust should be aggregated with FOH shares
in the QTIP trust for purposes of ascertaining the fair market
value of property passing from decedent.
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