Betty's adjusted gross estate is $18 million. The death taxes and funeral and administration expenses of her estate total $2.4 million. Included in Betty's gross estate is stock in Heron Corporation valued at $6.6 million as of the date of her death. Betty had acquired the stock six years ago at a cost of $1,620,000. If Heron Corporation redeems $2.4 million of Heron stock from the estate, the transaction will qualify under § 303 as a redemption to pay death taxes and receive sale or exchange treatment.

Question

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Under IRC § 303, a redemption of stock to pay death taxes can qualify for sale or exchange treatment if the value of the stock redeemed does not exceed the sum of the estate, inheritance, legacy, and succession taxes, plus the funeral and administration expenses. Since the redemption amount ($2.4 million) is being used to cover such expenses, it meets the criteria for § 303, assuming other conditions of § 303 are also met.

Betty's Adjusted Gross Estate Is $18 Million