American College Exam HS330 Topic 1 Question 2 Discussion

Among the assets in a decedent's gross estate is stock in a closely held corporation that was left to a nephew. The interest passing to the nephew is required to bear the burden of all estate taxes and expenses. The relevant facts about this estate are:

Adjusted gross estate $1,200,000

Fair market value of stock in the

closely held corporation 500,000

Administration and funeral expenses 25,000

State inheritance taxes 40,000

Federal estate taxes 160,000

What amount of closely held corporate stock may be redeemed under IRC Section 303 so that the redemption will be treated as a sale or exchange rather than a dividend distribution?