Daughter, a professional investment advisor, managed the investment portfolio of her father (Father), a wealthy invalid. Because of the far-ranging nature of Fathers investment portfolio, Daughter would spend at least six hours, and sometimes more, each week on that task for the last 15 years of Fathers life. Two days before Fathers death, he made a will for the first time in his life, at the urging of a purported Mystic of The Church of Magic and Sun Worship. The Mystic, who knew of Fathers wealth, had started regularly visiting Father three weeks before his death.

Daughter took legal action to set Fathers will aside on grounds of undue influence and lack of testamentary capacity. No reference was made in Daughters legal action to the hours she had spent managing Fathers investment portfolio. Daughters action was successful. Because the will was held invalid on the grounds Daughter had argued for, Father was considered to have died intestate, and Daughter took in intestacy as Fathers only surviving heir. She thus received his total estate, in the value of $10 million,

What part, if any, of the $10 million is includible in Daughters income and what part is excludible.

1. All of the $10 million is includible in Daughters income (as compensation for her services).
2. $2.25 million: An expert witness testified that Daughters services had a value of $150,000 a year, for a total of $2.25 million for that 15-year period. Accordingly, only that amount was treated as compensation to Daughter. The rest is excluded as a bequest, devise or inheritance.
3. $450,000, because Daughter successfully argued to the Internal Revenue Service that the statute of limitations was open only for the three years before Fathers death, and therefore only $450,000 (see B. immediately above) is includible in Daughters income.
4. All of the $10 million is excludible from Daughters income as a bequest, devise or inheritance.