How is estate tax calculated initially?

The initial calculation of estate tax starts with computing the gross estate value. The gross estate encompasses the total value of all a decedent's assets at the time of death, which includes real estate, personal property, bank accounts, investments, and other financial assets. This value forms the basis for determining the estate tax liability.

The gross estate is the first step in the process because it provides a comprehensive framework for understanding the worth of the estate as a whole. Once the gross estate is established, deductions for debts, funeral expenses, and other allowable deductions are then subtracted to determine the taxable estate, ultimately leading to the computation of the estate tax itself.

Understanding this initial step is crucial because it sets the stage for the entire tax assessment process. The other options do not correctly represent the first action taken when assessing estate tax, as they either refer to income, assets in a different manner, or personal expenses that do not contribute directly to the calculation of estate tax.