Prior to D’s death, D owned all the preferred stock of Corporation Y and D’s children owned all the common stock Sample Clauses

Prior to D’s death, D owned all the preferred stock of Corporation Y and D’s children owned all the common stock. At that time, the preferred stock had 60 percent of the total voting power and the common stock had 40 percent. Under the corporate by-laws, the voting rights of the preferred stock terminated on D’s death. The value of D’s interest immediately prior to D’s death (determined as if the voting rights were non- lapsing) was $100X. The value of that interest immediately after death would have been $90X if the voting rights had been non- lapsing. The decrease in value reflects the loss in value resulting from the death of D (whose involvement in Y was a key factor in Y’s profitability). Section 2704(a) applies to the lapse of voting rights on D’s death. D’s gross estate includes an amount equal to the excess, if any, of $90X over the fair market value of the preferred stock determined after the lapse of the voting rights.