What is the result when the gross estate is reduced by allowable deductions?

• A. Gross estate
• B. Taxable estate
• C. Net estate
• D. Deductions

Answer: (B)

Subtracting allowable deductions from the total value of everything the decedent owned (the gross estate) yields the amount that is actually taxed—the taxable estate. This is the figure used to calculate estate tax, after applying any credits. Deductions reduce the gross estate to that taxable amount, by including items like funeral and administrative expenses, debts, and other permissible deductions such as marital and charitable deductions. The term net estate can refer to a different measure (often the value remaining after debts and expenses are paid) and isn’t the result of subtracting deductions from the gross estate for tax purposes.