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On July 12, 1996, the condominium was sold for a purchase
price of $155,000. The proceeds of the sale were distributed by
the closing agent to the beneficiaries of the trust, and the
trust was terminated.
A Form 706, United States Estate (and Generation-Skipping
Transfer) Tax Return, was filed for decedent’s estate on October
31, 1996. Therein an election was made under section 2032(a) to
value decedent’s gross estate as of the alternate valuation date.
The gross estate so reported did not include any value
attributable to the condominium. Following an examination of
decedent’s estate tax return, which was initiated on October 28,
1997, respondent determined that the condominium was includable
in decedent’s gross estate at a fair market value of $125,000.
Discussion
I. Inclusion of the Condominium in Decedent’s Gross Estate
A. General Rules
As a general rule, the Internal Revenue Code imposes a
Federal tax “on the transfer of the taxable estate of every
decedent who is a citizen or resident of the United States.”
Sec. 2001(a). Such taxable estate, in turn, is defined as “the
value of the gross estate”, less applicable deductions. Sec.
2051. Section 2031(a) then specifies that the gross estate
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