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The timing issue involved in placing a value on the gross
estate was addressed by the Court of Appeals for the Fifth
Circuit in the following oft-quoted pronouncement:
Brief as is the instant of death, the court must
pinpoint its valuation at this instant--the moment of
truth, when the ownership of the decedent ends and the
ownership of the successors begins. It is a fallacy,
therefore, to argue value before--or--after death on
the notion that valuation must be determined by the
value either of the interest that ceases or of the
interest that begins. Instead, the valuation is
determined by the interest that passes, and the value
of the interest before or after death is pertinent only
as it serves to indicate the value at death. In the
usual case death brings no change in the value of
property. It is only in the few cases where death
alters value, as well as ownership, that it is
necessary to determine whether the value at the time of
death reflects the change caused by death, for example,
loss of services of a valuable partner to a small
business. [United States v. Land, 303 F.2d 170, 172
(5th Cir. 1962).]
Thus, it is now generally held, including in this Court,
that the estate tax is laid on the interest that passes or is
transferred at death. Estate of Chenoweth v. Commissioner, 88
T.C. 1577, 1582 (1987). Furthermore, while in the typical
scenario this interest will be identical to that held by the
decedent, it must be recognized that situations can exist where
death itself will change the value of a property interest.
Likewise, case law also establishes that valuation should “take
into account transformations brought about by those aspects of
the estate plan which go into effect logically prior to the
distribution of property in the gross estate to the
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