On June 1, 2013, Mario entered into a contract to sell real estate for $1 millio

Question

On June 1, 2013, Mario entered into a contract to sell real estate for $1 million (adjusted basis $200,000). The sale was conditioned on a rezoning of the property for commercial use. A $50,000 deposit placed in escrow by the purchaser was refundable in the event the rezoning was not accomplished.
After considerable controversy, the application was approved on November 10, and two days later, the sum of $950,000 was paid to Mario’s estate in full satisfaction of the purchase price. Mario had died unexpectedly on November 1. Discuss the estate and income tax consequences of this set of facts if it is assumed that the sale of the real estate occurred:
a. After Mario’s death.
b. Before Mario’s death.
When do you think the sale occurred? Why?                                                    

Explanation / Answer

Internal revenue service 2017 estate and gift tax exemption is upto $5.49 million per individual

since above transaction which finally settled for $9,50,000 is within the limits and therefore marios death after contract is executed will not have any legal implications on his heirs.

if contract is executed before marios death , then he will be binding on the sale and tax implications arise.

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