Last year Diego transferred a life insurance policy worth $75,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson, Juan, upon his graduation from college, or to Juan's estate upon his death. Diego paid $5,000 of gift tax on the transfer of the policy. Early this year, Diego died and the insurance company paid $600,000 to the trust. What amount, if any, is included in Diego's gross estate?
What will be an ideal response?
$605,000.
Diego died within three years of the date of gifting the life insurance, so the face value of the policy ($600,000) and the gift tax ($5,000) is included in his gross estate.
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