Estate Tax Questions from Study Guide
1. The value of a life insurance policy owned by a decedent on the life of someone other than the decedent has to be included
in the decedent's gross estate.
2. If a decedent possessed a power to appoint property to his adult children, the value of property subject to the power has to
be included in the decedent's gross estate.
No amount has to be included in the decedent's gross income because the power is not a general power of appointment.
3. While Chris Hanley was alive, she was receiving an annuity from her former employer's qualified retirement plan. Following
her death, annuity payments to her ceased, but annuity payments continued to her husband. No amount has to be included
in her gross estate.
The value of the annuity payable to Chris' husband has to be included in Chris' gross estate.
4. Ryan and Jennifer Heuser were married and U.S. citizens. Ryan purchased 1,000 shares of Gamma Corporation, Inc. with
his own money but put title to the stock in his name and Jennifer's with right of survivorship. If Ryan dies before Jennifer,
the entire value of the stock has to be included in Ryan's gross estate.
Only half of the value of the stock has to be included in Ryan's gross estate, even though he furnished all of the consideration
to acquire the stock.
1. Alicia Alford died owning 1,000 shares of Kappa Corporation, Inc. On the date of her death, which was the valuation date,
the lowest sale price for the stock was $15.00, the highest sale price of the stock was $15.50, and the closing sale price for
the stock was $15.30. What is the estate tax value of Alicia's 1,000 shares of Kappa Corporation?
The fair market value of the stock is the mean between the highest and lowest quoted selling prices that day: 1,000 X [($15.00 + $15.50)
= $1,000 X $15.25 = $15,250.
2. Rebecca Andrade died owning 100 shares of Sigma Corporation, Inc. She died on a Sunday, which is the valuation date.
There were no sales of the stock the next day, but on Tuesday, the mean sale price for the stock was $20. There were no
sales of the stock on the preceding Thursday or Friday, but on the preceding Wednesday the mean sale price for the stock
was $25. What is the estate tax value of Rebecca's shares in Sigma Corporation?
The fair market value of the stock is calculated by taking a weighted average of the mean sale prices on the nearest trading dates before and
after the valuation date and weighing that average inversely based on the number of trading days between the valuation date and the trading
(2 x $25) + (3 x $20)
x 100 =
= $22 x 100 = $2,200
John Aalto died on April 2, 2011. The amount of his gross estate was $3,000,000, the amount of his
estate's allowable deductions was $750,000, and the amount of his adjusted taxable gifts was $300,000.
What is the amount of his estate's tentative tax?