CHAPTER II

GROSS ESTATE

Revenue Act of 1924.

SEC. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated—

(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate:

(b) To the extent of any interest therein of the surviving spouse, existing at the time of the decedent's death as dower, curtesy, or by virtue of a statute creating an estate in lieu of dower or curtesy.51

(e) To the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than a fair consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than a fair consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants;

51 See, under an earlier Act, Randolph v. Craig, (1920) 267 Fed. 993, 1 Am. Fed. Tax R. 1242.

(g) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life. .

(h) Subdivisions (b), (c), (d), (e), (f), and (g) of this section shall apply to the transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as severally enumerated and described therein, whether made, created, arising, existing, exercised, or relinquished before or after the enactment of this Act.

Regulations 68.

ART. 10. Character of interests included. It is designed by the foregoing provision of the statute that there shall be included in the gross estate the value of all property of the decedent whether real or personal, tangible or intangible, the beneficial ownership of which was in the decedent in his lifetime, and which, upon his death, formed his estate.

The test which determines whether the value of a given interest is to be so included, pursuant to the foregoing provision of the statute, is that stated therein which requires that the property, after death, shall be subject to: (1) Payment of the charges against the estate; (2) payment of the expenses of administration; and (3) distribution as a part of the

estate.

ART. 11. Specific property to be included.-The value of all real property situated in the United States and owned by the decedent at the date of his death should be included in the gross estate, whether the decedent was a resident or a nonresident, and whether the property came into the possession and control of the executor or administrator or passed directly to heirs or devisees. Where the decedent was a resident, the value of all personal property owned by him should be included, wherever situated. Where decedent was a nonresident, the value of so much of his personal property as had its situs in the United States at the time of his death should be included, and the value of his entire gross estate, wherever situated, should be disclosed, if deductions are claimed. (See arts. 52 to 54.) As to the situs of the personal property of nonresident decedents, see Article 50.

The value of a vested remainder should be included in the gross estate. Nothing should be included, however, on ac

count of a contingent remainder where the contingency does not happen in the lifetime of the decedent, and the interest consequently lapses at his death. Nor should anything be included on account of an interest or an estate limited for the life of the decedent. There should be included, however, the value of an annuity payable to, or an interest or an estate vested in, the decedent for the life of another person who survives him. For rules in valuing such remainders, annuities, and interests or estates pur autre vie, see article 13, subdivision (10).

A cemetery lot owned by the decedent is part of his gross estate, but its value is limited to the salable value of such part of it as is not designed for the interment of the decedent or members of his family. Salary due the decedent, and rents and interest accrued at the time of his death, whether then payable or not, and unpaid matured coupons, should be included. The value of notes or other claims held by the decedent should be included, though they are canceled by his will. As to the valuation of notes and claims, see article 13, subdivisions (5) and (8). All bonds, including Federal, State, and municipal, should be included. (See art. 12 for manner of listing and describing property returned.)

Dividends on either common or preferred stock should be included only where declared prior to the decedent's death and not reflected in the market value of the stock on the day of death. Thus dividends, both declared and payable to holders of record on a date prior to the decedent's death, should be included, provided the stock is valued "ex dividend" on the date of death.

Example: A 5 per cent dividend upon stock is declared March 1 payable on April 1, to stockholders of record on March 15. If the death occurred on March 10, and the market value on that day was 90, the value to be returned for both stock and dividend is 90, the dividend being reflected in the market value of the stock. If the death occurred on March 20, the dividend is not reflected in the market value, and must be returned in addition to the market value of the stock on March 20.

ART. 12. Description of property listed on return.- In listing upon the return the property comprising the gross estate (other than household and personal effects, as to which see

subdivision (9) of article 13), the description thereof should be such that the property may be readily identified. Thus, a legal description should be given of each parcel of real estate, its area, and, if improved, a short statement of the character of the improvement. Where, however, the property is situated in a city and has a street number, the name of the city, the street, and the number should be given instead of a legal description. Description of bonds should include number held, principal amount, name of obligor, date of maturity, rate of interest, date or dates on which interest is payable, series number where there is more than one issue, the exchange upon which listed, or the principal business office of the corporation, if unlisted. Description of stocks should include number of shares, whether common or preferred, and, if preferred, what issue thereof, par value, quotation at which returned, exact name of corporation, and, if the stock is unlisted, the location of the principal business office and state in which incorporated and the date of incorporation. If a listed security, state principal exchange upon which sold. Description of notes should include name of maker, date on which given, date of maturity, amount of principal, amount of principal unpaid, rate of interest and whether simple or compound, date to which interest has been paid, and amount of unpaid interest. Description of bank accounts should disclose name and address of depository, amount on deposit, whether a checking, savings, or a time deposit account, rate of interest, if any payable, amount of interest accrued and payable, and serial number. Description of life insurance should give the name of the insurer, number of policy, face value, name of beneficiary, and amount paid or payable thereunder In describing an annuity, the name. and address of the grantor of the annuity should be given, or if payable out of a trust or other funds such a description as will fully identify it. If payable for a term of years, the duration of the term and the date on which it began should be given, and if payable for the life of a person other than the decedent, the date of birth of such person should be stated. Judgments should be described by giving the title of the cause and the name of the court in which rendered, date of judgment, name and address of judgment debtor, amount of judgment, rate of interest to which subject, whether any pay

ments have been made thereon, and, if so, when and in what

amounts.

ART. 13. Valuations.-(1) General.-The value of all property includable in the gross estate is the fair market value thereof at the time of the decedent's death. The fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell. Where the property is sold within a reasonable period after the decedent's death, and it is shown that the selling price reflects the fair market value thereof as of the date of decedent's death, the selling price will be accepted. Neither depreciation nor appreciation in value subsequent to the date of decedent's death will be considered. All relevant facts and elements of value should be considered in every case.

(2) Real estate. The property should not be returned at the local assessed value thereof unless such value represents the fair market value as of the date of decedent's death. (See art. 12 for manner of listing and describing real estate.)

(3) Stocks and bonds.-The value of stocks and bonds listed upon a stock exchange should be determined by taking the mean between the highest and lowest quoted selling prices upon the date of death. If the decedent died on a Sunday or holiday, the transaction of the next previous business day will govern. If there were no sales on the date of death, the values should be determined by taking the mean between the highest and lowest sales upon the nearest date either before or after the date of death, if within a reasonable period. If the security is listed upon more than one exchange, the records of the principal exchange should be employed. In valuing listed stocks and bonds the executor should observe care to consult accurate records to obtain values as of the date of death.

If the securities are not listed upon an exchange, but are dealt in actively through brokers, or have an active market, the value should be determined by taking the sale price as of the date of death, or, where there was no sale on that date, of the nearest date thereto upon which a sale was made, if within a reasonable period. Securities in which there are occasional transactions, but which are not dealt in actively enough to clearly establish a fair market value, should be valued upon