Adjusted Gross Estate


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Adjusted Gross Estate

In estate tax, the sum total value of a decedent's assets plus certain additions, less the total value of all debts. Assets included in the adjusted gross estate include, but are not limited to: property (including community property and all savings), certain types of gifts made in the last three years of the decedent's life, property or income transferred before death but under which the decedent maintained use and/or enjoyment, revocable transfers, life insurance, and pensions and annuities with death benefits. The debts include mortgages, loans, liens, and other liabilities. If the value of the adjusted gross estate exceeds $1 million, it is subject to the estate tax. See also: Taxable estate.
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18) Further, the maximum amount of tax that may be paid in installments is an amount bearing the same ratio to the estate tax as the value of the closely held business property bears to the amount of the adjusted gross estate.
Example: A decedent left a sole proprietorship with a value of $500,000 and an adjusted gross estate of $1,000,000.
If stock in one or more closely held corporations exceeds 35% of an individual's adjusted gross estate, an IRC section 303 stock redemption can help the executor raise cash for death taxes, funeral costs and administration expenses without dividend treatment.
Melissa dies at a time when her portion of the holdings amounts to 65% of her adjusted gross estate.
7] According to Internal Revenue Code 2057(c), most gilts given within 3 years of a decedent's death are included in adjusted gross estate.
The decedent's interest in the family-owned business must exceed 50% of the adjusted gross estate (adjustments for lifetime gifts).
To qualify for the exclusion, the aggregate value of the decedent's qualified business interests that are passed to qualified heirs must exceed 50 percent of the decedent's adjusted gross estate, and the decedent or a member of the decedent's family must have owned and materially participated in the trade or business for at least five of the eight years preceding the date of the decedent's death.
2032A, since qualified use assets did not meet the 50% of adjusted gross estate test.
To qualify for this relief, the asset(s) must be (a) a closely held business engaged in an active trade or business within the meaning of the Code, (b) included in the decedent's gross estate and (c) have a value greater than 35% of the adjusted gross estate.
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