Edna has been appointed executor of Denise’s estate and consults you about the estate tax consequences of Denise’s death. Denise purchased a house in Montpelier, Vermont, 15 years ago for $100,000. Her mortgage was $80,000. Two weeks before her death she received an offer for $500,000 for the house. Denise and Connie purchased a condominium in Acapulco for $100,000 ten years ago. They owned it as tenants in common. Denise purchased an apartment building in Boston 12 years ago for $450,000. She had claimed $75,000 in depreciation deductions on her income tax returns. The apartment building generates $750,000 net income a year. Four years ago, Denise purchased a car for $18,000. Eight years ago, Denise purchased a sailboat for $50,000. At the time of her death, Denise owned 500 shares of IBM, Inc., stock, 2,000 shares of Microsoft, Inc., 700 shares of 3M, Inc., and 100 shares of XYZ, Inc., a family business (her shares represent a 20 percent interest). Denise also owned municipal bonds with face amounts totaling $100,000. They produce $8,000 of income per year, which is exempt from federal income tax pursuant to §103. Denise had a checking account (balance of $1,200), savings account (balance of $5,000), and a money market account (balance of $50,000). Denise owned a cemetery plot for her own burial. Denise also owned furniture purchased for $45,000, clothes, and household furnishings. In addition, she owned an art collection, which was insured for $250,000, and a ruby ring, which was insured for $1,500. Denise also owned a golden retriever and a Siamese cat.

Denise died on July 2. After her death, Edna received (1) a check for $5,000 representing Denise’s earned, but unpaid, salary; (2) a check for $10,000 from her employer designated “bonus”; and (3) checks totaling $50,000 each month representing rent from the apartment complex owned by Denise.

Denise died as a result of an automobile accident. Edna sued the other driver and received $500,000 in settlement. Before her death, Denise had sued

Geoffrey for patent infringement on a device that Denise had patented. Discovery did not begin until after Denise’s death, and the case is scheduled to come to trial one year from the date of Denise’s death.

What is included in Denise’s gross estate? At what value? Why???