Which type of gifts is subject to the three-year adback rule for gross estate?

The three-year adback rule in the context of estate planning refers to how certain gifts made by the decedent can be included in the gross estate if the individual dies within three years of making those gifts. This rule is primarily aimed at ensuring that the Internal Revenue Service can assess and include specific transfers that may have been made with the intent of reducing estate tax liability.

The correct answer highlights that the three-year adback rule specifically applies to certain gifts, including life insurance policies. When an individual transfers a life insurance policy to another person, the value of that policy may be included in their gross estate if the transfer takes place within three years of death. This is to prevent the avoidance of estate taxes through the gifting of significant financial assets shortly before death.

The other options do not accurately describe the scope of the three-year adback rule. For instance, not all gifts, including many small or trivial gifts, are subject to this rule; it’s tailored towards specific types like life insurance policies and certain high-value gifts. Furthermore, the rule does not exclusively apply to cash gifts or impose a blanket threshold of $10,000; rather, it is concerned with the timing of the gift and the intent behind it in relation to estate planning strategies. Thus,