Estate of Ronald G. Keeton, Deceased, Kimberly Keeton Spence, Personal Representative - Page 10

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          “adjusted value” and “adjusted gross estate”.4                              
               By stipulating that the “combined value” of Keeton                     
          Corrections and NSP exceeds 50 percent of the adjusted gross                
          estate, the parties have left out a crucial part of the                     
          calculation by not including the word “adjusted” in front of                
          value.  The parties did not, however, omit the word “adjusted”              
          from “adjusted gross estate”.  The estate is not alleging that              

               4Sec. 2057(c) and (d) defines the “adjusted gross estate”              
          and the “adjusted value” of the QFOBIs.  The adjusted value of              
          the QFOBIs enters into the numerator, and the adjusted gross                
          estate is the denominator for purposes of the 50-percent test               
          under sec. 2057(b)(1)(C).  The adjusted value of the QFOBIs is              
          determined by aggregating the value of all qualified family-owned           
          business interests that are includable in the decedent’s gross              
          estate and are passed from the decedent to a qualified heir.                
          This amount is then reduced by the value of claims and mortgages            
          under sec. 2053(a)(3), and (4), less the following: (1)                     
          Indebtedness on a qualified residence of the decedent (determined           
          in accordance with the requirements for deductibility of mortgage           
          interest set forth in sec. 163(h)(3)); (2) indebtedness incurred            
          to pay the educational or medical expenses of the decedent, the             
          decedent’s spouse, or the decedent’s dependents; and (3) other              
          indebtedness of up to $10,000.  H. Conf. Rept. 105-220, at 397-             
          398 (1997), 1997-4 C.B. (Vol. 2) 1457, 1867-1868.  The value of             
          the adjusted gross estate is equal to the decedent’s gross                  
          estate, reduced by any claims against the estate and mortgages on           
          estate assets, and increased by the amount of the following                 
          transfers, to the extent not already included in the decedent’s             
          gross estate: (1) Any lifetime transfers of qualified business              
          interests that were made by the decedent to members of the                  
          decedent’s family provided such interests have been continuously            
          held by members of the decedent’s family (other than the                    
          decedent’s spouse), plus (2) any other transfers from the                   
          decedent to the decedent’s spouse that were made within 10 years            
          of the date of the decedent’s death, plus (3) any other gifts               
          made by the decedent within 3 years of the decedent’s death,                
          except nontaxable transfers made to members of the decedent’s               
          family covered by the annual per donee exclusion of sec. 2503(b).           
          Id.                                                                         






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