117 T.C. No. 21
UNITED STATES TAX COURT
ESTATE OF HON HING FUNG, DECEASED, BERNARD FUNG, EXECUTOR,
Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2173-00. Filed December 10, 2001.
D, a nonresident alien for U.S. tax purposes,
possessed at the time of his death interests in certain
properties located in the State of California. D’s
interests in two of these parcels, one of which was
subject to a promissory note secured by a deed of
trust, were contained in his residuary estate. D’s
will provided for his surviving spouse to receive a
three-eighths fractional interest in his residuary
estate, with the remaining five-eighths going to his
sons. In accordance with an agreement executed by the
residuary beneficiaries, the two California properties
were distributed to D’s surviving spouse while the
foreign residuary assets were distributed to D’s sons.
Held: The full value of D’s interest in the
encumbered residuary property, rather than the net
equity value thereof, must be included in his gross
estate.
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