What is included in the gross estate for tax purposes?

The correct answer encompasses the totality of a person's assets at the time of their death, which is critical for determining the gross estate for tax purposes. The gross estate includes all property owned by the decedent, which consists of both tangible and intangible assets. This includes real estate, cash, stocks, and personal property, among other items.

Moreover, life insurance policies are specifically included in the gross estate if the decedent had incidents of ownership over the policy or if the policy proceeds are payable to the estate. This is significant because life insurance can be a substantial asset and its inclusion affects the overall estate value and, consequently, the tax liability.

Other options are limited in scope. For instance, liquid assets alone or real estate with tangible assets do not capture the full array of items that must be reported in the gross estate. Focusing solely on gifts made within the last three years is also incomplete, as it neglects many other assets and rights that contribute to the gross estate calculation, further emphasizing the comprehensive nature of the correct choice.