The fair market value of notes, secured or unsecured, is presumed to be the amount of unpaid principal, plus interest accrued to the date of death, unless the executor establishes that the value is lower or that the notes are worthless. However, items of interest shall be separately stated on the estate tax return. If not returned at face value, plus accrued interest, satisfactory evidence must be submitted that the note is worth less than the unpaid amount (because of the interest rate, date of maturity, or other cause), or that the note is uncollectible, either in whole or in part (by reason of the insolvency of the party or parties liable, or for other cause), and that any property pledged or mortgaged as security is insufficient to satisfy the obligation.
Notes of Decisions
Est. of Gribauskas v. Comm'r, 116 T.C. 142 (Tax Ct. 2001).
· cites it 4× “Notes receivable, although exhibiting a wide array of discrete terms and conditions, generally are the product of an agreement that provides for a series of payments over a period not necessarily determined by reference to the holder's life. Pursuant to section 20.2031-4 ,…”
Est. of Friedberg v. Comm'r, 63 T.C.M. 3080 (Tax Ct. 1992).
· cites it 2× “Preliminarily, we observe that notes are valued at the full remaining indebtedness, unless there is reason for a discount. Sec. 20.2031-4 , Estate Tax Regs.”
Est. of Maurice Frankel v. United States, 512 F.2d 1007 (5th Cir. 1975).
“Working from this premise, the court went on to apply the estate tax regulation dealing with valuation of notes, 26 C.F.R. § 20.2031-4 , which provides in pertinent part: The fair market value of notes, secured or unsecured, is presumed to be the amount of unpaid principal, plus…”
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