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5. Conclusion
We conclude that the estate may not deduct $400,000 from
decedent’s gross estate as a claim against her estate under
section 2053(a)(3) based on the $400,000 promissory note.10
B. Whether Decedent’s Gross Estate Includes $21,782 of Accrued
Interest Owed by Advance Leasing on Certain Notes
Decedent’s estate included in the gross estate $150,000
representing the principal amount that Advance Leasing owed on
its notes to H & R Properties and the Trust. However, the estate
did not include in the gross estate $21,782 representing accrued
interest that Advance Leasing owed on those notes when decedent
died.11
The gross estate includes the value, at the time of death,
of all property in which decedent had an interest. Secs.
2031(a), 2033. The $21,872 of accrued interest is included in
decedent’s gross estate to the extent that it had value at the
time of her death. See secs. 2031(a), 2033.
Fair market value is “‘the price at which the property would
change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or to sell and both
10 In light of this holding, we need not decide
respondent’s other arguments that the note was not bona fide or
enforceable against decedent’s estate under Washington law or
that decedent lacked competence to execute the power of attorney.
11 The estate did not elect the alternate valuation date
under sec. 2032.
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