CFP Estate Planning Practice Test

Question: 1 / 400

How is a note receivable treated at the death of a decedent?

It is excluded from the gross estate.

It is valued at only the interest accrued.

It is included at the remaining principal amount plus accrued interest.

A note receivable, representing a legal obligation for someone to pay a specific amount, is included in the gross estate of the decedent at the time of their death. The valuation process takes into account not only the remaining principal amount owed on the note but also any interest that has accrued up to the date of death. This comprehensive valuation reflects the total monetary benefit that the decedent's estate would receive, encompassing both the unpaid principal and the accrued interest.

Including both principal and accrued interest is crucial because it represents the full value of the asset that the estate holds. This ensures that the decedent's financial interests are accurately reflected in the estate's value during estate tax calculations and distribution to beneficiaries. Therefore, detailing both components provides a clear and complete picture of the estate's financial health and obligations at the time of death.

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