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.
References in periodicals archive ?
In order to qualify for the family-owned business deduction, at least 50% of the value of the adjusted gross estate must consist of the sum of (1fl) family-owned business interests included in the estate and (2) certain gifts of family-owned business interests.
In order to qualify for the family-owned business deduction, at least 50% of the value of the adjusted gross estate must consist of the sum of (1) family-owned business interests included in the estate and (2) certain gifts of family-owned business interests.6 Gifts of family-owned business interests include family-owned business interests that decedent gave to members of decedent's family if the members of decedent's family retained such interests until decedent's death.
(5) For purposes of illustration, this chart assumes there is no surviving spouse and that the adjusted gross estate is equal to the taxable estate.
Deductions may be taken to reduce the adjusted gross estate still further: (1) the marital deduction for certain transfers to a surviving spouse, (2) the charitable deduction for certain transfers to a qualified charity, (3) the deduction for qualified familyowned business interests (EGTRRA 2001 repeals this deduction after 2003 and before 2011), and (4) a deduction for state death taxes (replaces state death tax credit for 2005 to 2010).
In qualifying for the IRC Section 6166 election, the "more than 35% of adjusted gross estate" requirement (see Chapter 16) is met only if the estate meets such requirement both with and without application of the three-year inclusion rule of IRC Section 2035.
The gross estate must include an interest classified as a "closely held" business, the value of which exceeds 35% of the adjusted gross estate. In the case of an estate in which the decedent made a gift of property within three years of death, the estate is treated as meeting the more than 35% requirement only if the estate meets such requirement both with and without the application of the three-year inclusion rule of IRC Section 2035 (see Chapter 15 regarding the estate tax).
* If a decedent's interest in a closely held business exceeds 35% of the decedent's adjusted gross estate, Internal Revenue Code section 6166 allows the estate to defer taxes for up to 14 years by requiring the IRS to accept a 15-year payment schedule (5 interest-only payments, followed by 10 estate tax payments).
To qualify for special use valuation, the value of the farm must be at least 50% of the estate's total net assets (i.e., gross assets minus liabilities secured by or related to the assets), and at least 25% of the adjusted gross estate must be qualified real property.
To qualify for the exclusion, the value of the decedent's family-owned business interests must pass to qualified heirs and must exceed 50 percent of the decedent's adjusted gross estate. A qualified family-owned business interest is defined as any ownership interest in a United States trade or business, regardless of the form of entity, if the ownership of the trade or business is held 1) at least 50 percent by one family; 2) 70 percent by two families; or 3) 90 percent by three families.
In summary, that section provides that if the value of a closed business is more than 35% of the decedent's adjusted gross estate, the estate tax attributable to the value of the interest may be paid in installments.
If the value of an interest in a closely held business, including a farm, exceeds 35% of the adjusted gross estate, the executor can elect to pay the estate tax in installments.
If the stock interest will be more than 35 percent of the stockholder's adjusted gross estate, then his stock will qualify under Section 303 for a partial redemption at his death.
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