Question

What is the value of cedric's gross estate assuming the date of death valuation is selected?

Use the following scenario to answer questions 10 through 13. Cedric died on January 1, 2018 after a rogue hot air balloon hit his car. The property that he owned at the time of his death included the following: FMV on FMV on FMV on FMV on FMV on Property Basis 1/1/2018 $512,500 $32,500 $300,000 $325,000 $350,000 $60,000 $44,070 $645,000 4/1/2018 $520,250 $30,856 $309,000 $302,812 $340,918 $58,627 $42,748 $654,675 $1,250,000 $1,850,000 $1,150,555 $1,128,222 $1,145,865 $1,543,468 $2,646,450 $4,119,070 $3,410,441 $3,377,214 $3,371,163 $3,745,957 7/1/2018 $524,412 $30,547 $318,270 $287,671 $323,872 $58,258 $41,465 $664,495 10/1/2018 $528,607 $30,242 $311,905 $273,288 $307,678 $58,894 $40,221 $674,463 1/1/2019 $532,836 $29,940 $305,667 $259,623 $292,295 $58,534 $39,015 $684,579 House $275,000 $45,000 $125,000 $125,000 $125,000 $140,000 $73,450 $488,000 Boat IRA Annuity Note Receivable Personal Property Car Rental Property Investment Account Total All property listed above was owned in sole ownership by Cedric. The annuity is a joint and survivor annuity and will continue to pay his wife Mindy for her lifetime. Cedric's will leaves all probate assets to his son and daughter in equal shares. Cedric also owned a life insurance policy on his life. His basis in the policy was $95,000 and the death benefit was $1,000,000. The beneficiary of the insurance policy was Cedric's daughter, Daphne. Cedric's investment account had a transfer on death designation to Daphne. The family sued the balloon operator and received $1,000,000 for wrongful death payable to Mindy and $500,000 for Cedric's pain and suffering payable to Cedric's estate. Cedric made substantial gifts during his life. He paid gift tax of $108,000 in 2006, $97,200 2014, and $185,250 on April 15, 2016. Cedric's funeral cost $15,000. The car was sold 4/1/18 for its fair market value on that date in order to pay for Cedric's $38,000 hand-carved marble headstone. Cedric had $350, 000 of medical expenses from the accident, but all expenses were covered by his medical insurance. The note receivable was being paid monthly.

Answer 1

• To answer this question first we need to understand the term, "Gross Estate", which means the total value of the assets owned by an individual at the time of his death, (please note the gross value shall only include the assets and not any liabilities of the individual, as it is the gross amount and not net amount)
• Here we need to compute the gross estate for the individual - Cedric"
• For the computation we will consider the FAIR MARKET VALUE for Cedric's assets
  • Now the date to be considered for the fair market value of the assets is provided in the question which is the date of valuation to be considered assuming Cedric's death date which is 1/1/2018, now lets look at the table for the computation of the gross estate:

    Property Name	Fair Market Value as on 1/1/2018	To be included in gross estate (Yes/No)	If yes amount	If No, comments
    House	5,12,500	Yes	5,12,500
    Boat	32,500	Yes	32,500
    IRA	3,00,000	Yes	3,00,000
    Annuity	3,25,000	Yes, as the annuity is a joint and survivor annuity the amount to be included for the gross estate computation will be only the amount that was contributed by Cedric which is nothing but the basis for the asset, 125000	125,000
    Note receivable	3,50,000	Yes	3,50,000
    Personal Property	60,000	Yes	60,000
    Car	44,070	Yes	44,070
    Rental Property	6,45,000	Yes	6,45,000
    Investment Account	1,850,000	No	-	this will not be included in the gross estate assuming the court has verified all the documents and the beneficiary is Daphne
    Proceeds from suing the balloon operator and gift tax	1890450	No	-	to be determined at the time of computing probate asset of Cedric
    Total	4,119,070		2,069,070

• Hope I have answered your question, if yes give a thumbs up