Bob died on 1/1/19 survived by his wife, Candace, and three brothers, Don, Jim and Rex. By his will, Bob gave Candace a “preresiduary pecuniary formula” gift. (See “Funding Marital Gifts” in Chapter IX for explanation.) When the value of Bob's taxable estate is combined with his post-1976 taxable gifts, Candace receives $900,000 under the formula. Bob also made the following gifts:

1) to Don, all of my ABC stock;

2) to Jim, $200,000 to be satisfied in cash or in kind;

3) to Rex, the residue of my estate.

For the estate's one and only taxable year, it has the following items of receipt and expenditure:

ABC Dividends ..............$6,000

Other Dividends ............24,000

Statutory Fees ............(20,000)

Net receipts ..................10,000

On 10/1/20, Bob’s probate estate terminated, and Bob’s executor made the following distributions:

	Asset	AB	FMV
Candace	Cash	200,000	200,000
	Blackacre	500,000	600,000
	XYZ Stock	250,000	100,000
	Total	950,000	900,000
Don	Cash	6,000	6,000
	XYZ Stock	406,000	800,000
	Total	406,000	806,000
Jim	JKL Stock	100,000	200,000
Rex	Cash	63,212	63,212
	MNO Stock	200,000	250,000
	Total	263,212	313,212

Questions:

a) To what extent, if any, will Bob’s estate recognize gain or loss on these distributions?

b) Which of these distributions is a “tier-2” distribution and what is the amount of the distribution for tax purposes?

c) Determine the estate’s taxable income and the amount and character of income taxable to each beneficiary.