An estate may treat a qualifying redemption (to pay death taxes) as a sale if the redeemed stock is valued at more than what percentage of the gross estate, net of deductions allow... An estate may treat a qualifying redemption (to pay death taxes) as a sale if the redeemed stock is valued at more than what percentage of the gross estate, net of deductions allowed?
Understand the Problem
The question is asking about the percentage threshold that allows an estate to treat a stock redemption (specifically to pay death taxes) as a sale rather than a dividend distribution for tax purposes. This has to do with specific regulations regarding estate tax and stock redemptions.
Answer
The stock must be valued at more than 35% of the gross estate or more than 50% of the taxable estate to be treated as a sale.
To qualify for treatment as a sale, the redeemed stock must be valued at more than 35% of the gross estate, or more than 50% of the taxable estate, net of deductions allowed.
Answer for screen readers
To qualify for treatment as a sale, the redeemed stock must be valued at more than 35% of the gross estate, or more than 50% of the taxable estate, net of deductions allowed.
More Information
Section 303 of the Internal Revenue Code allows for a redemption of stock from a decedent's estate to pay for death taxes and administration expenses. This is an exception to the general rule that stock redemptions are treated as dividends, which are taxed at a higher rate.
Tips
Note the difference between the gross estate and the taxable estate when applying the percentage test. The taxable estate is the gross estate less deductions.
Sources
- 26 U.S. Code ยง 303 - Distributions in redemption of stock to pay ... - law.cornell.edu
- [PDF] Section 303 Stock Redemptions by Closely Held Corporations - scholarship.law.nd.edu
- [PDF] Sections 303 and 6166 in estate tax planning - eGrove - egrove.olemiss.edu
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