Estate of Eleanor T.R. Trotter - Page 7

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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.              
          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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