In 2000, Lucy borrowed $600,000 from her brother, Irwin, so that Lucy could start a business. The loan was on open account, and no interest or due date was provided for. Under applicable state law, collection on the loan was barred by the statute of limitations before Lucy died. Because the family thought that Irwin should recover his funds, the executor of the estate paid him $600,000. Because Lucy borrowed money from her brother to open a business, she was liable for the loan. However, she died and obviously could not pay the loan back, so Irwin made a claim against Lucy’s estate to repay the loan to him. Does he include this loan payback as income? Irwin, no, since there was no interest or dividends received for making the loan. Sec 61 of …show more content…
In 2007, she borrowed $300,000 from a bank and promptly loaned that sum to her controlled corporation. The executor of Lucy's estate prepaid the bank loan, but never attempted to collect the amount due Lucy from the corporation. The corporation needs to pay back the loan borrowed by Lucy to Lucy’s estate. Lucy’s estate has an interest in the loan because Lucy took out the loan. Section 2033 indicates that the value of the gross estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death. Lucy’s estate is still owed the amount she loaned to her controlled corporation. It was not a gift. Section 2033 states that the value of the estate shall include the value of all property to the extent of the interest of the decedent at her death. The estate needs to include the $300,000 plus any interest due as income. C. In 2008, Lucy promised her sister, Ida, a bequest of $500,000 if Ida would move in with her and care for her during an illness (which eventually proved to be terminal). Lucy never kept her promise, as her will was silent on any bequest to Ida. After Lucy's death, Ida sued the estate and eventually recovered $600,000 for breach of