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Lawrence D. Gorin
Lawrence D. Gorin, Tax Attorney
Category: Tax
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Experience:  30+ years of legal experience. Special emphasis in divorce & family tax matters.
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Are you familiar with the Gallenstein case in regard to real

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Are you familiar with the Gallenstein case in regard to real estate after a spouse dies.
If so, will you explain it to me? Thank you.
YOUR QUESTION:
Are you familiar with the Gallenstein case in regard to real estate after a spouse dies. If so, will you explain it to me?

ANSWER:
Yes, I am familitar with the Gallentstein case and, yes, I will try to explain it to you here.

You are referring to the case of Gallenstein v. U.S, 975 F.2d 286 (6th Cir 1992).

In the Gallenstein case, the taxpayer, Mrs. Gallenstein prevailed in a tax refund suit against the United States. The government appealed the decision of the US District Court judge, arguing that § 2040 of the Internal Revenue Code ("I.R.C.") [26 U.S.C. § 2040], as amended, which governs the value of jointly-owned property to be included in a decedent's estate for federal estate tax purposes, requires including only 50% of the value of certain farm property in the taxpayer's deceased husband's estate; and consequently, Mrs. Gallenstein could be taxed on the gain realized in the 50% not included in her husband's estate.

In oppostion, Mrs. Gallenstein contended that that the district court judge properly interpreted I.R.C. § 2040 as requiring 100% of the farm property to be included in her deceased husband's estate. With 100% inclusion, Mrs. Gallentstein received a stepped-up basis for the entire property; and as a consequence, no taxable gain from the sale.

A full explanation of the case here would simply amount to repeating the explanation given in the court opinion itself. See full opinion at:
http://scholar.google.com/scholar_case?case=3505291181358072230

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Edited by Lawrence D. Gorin on 4/26/2010 at 6:28 AM EST
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