Mackenzie, Holly and Brooke are friends who own a successful costume jewelry store in a resort area. Each friend owns 100 shares of stock in this closely held corporation. Two years ago they entered into a cross-purchase agreement and purchased life insurance policies on each others lives. Mackenzie died this year in a car accident. Which statement does not correctly describe the consequences at her death?

Select one:

a. Holly and Brooke will use the proceeds of the insurance policy they own on Mackenzies life to each buy 50% of the stock from Mackenzies estate.

b. The value of the two policies on her friends lives is included in Mackenzies estate.

c. Holly and Brooke can purchase the policies on their own lives from Mackenzies estate, and avoid income taxation under transfer-for-value rules.

d. The purchase of stock by the remaining shareholders is treated as dividends in Mackenzies estate.