[Anonymous]

Here is a question from an R4 SIM where you have to determine (among other things) the basis:

Taxpayer inherited property with a FMV of $4000 at death and a decedent’s basis of $3000. The decedent owned the property for one day. The alternate valuation date was selected and at the date the value was $5000.

I thought the basis in the property would be $4000 because when the alternate valuation date is selected, you use the value at the alternate date OR the date of distribution (whichever is earlier) UNLESS the value at the alternate date is higher than the FMV at death. However Becker says the basis is $5000. Is that correct? And is so could someone tell me why?

[lavendersky]

I think you are right. I have no idea why it is 5,000 unless the ques. is implying us to use that 5,000 if alternate valuation date was elected. Becker could be wrong sometimes….i emailed them once about a FAR sim that was so obvious that they made a mistake and they had to change the answer.

FAR- PASSED
AUD- PASSED
REG- PASSED
BEC-

You got to do what you have to do!

[Anonymous]

Thanks. There are several items that appear to be errors in this particular SIM. Not helpful because it is making me question what I *thought* I knew.

[Lucci]

I thought it is $5,000 because isn't that the value at the Alternate Valuation Date? I thought the rule was; use the value at the Alternate Valuation Date (date actually distributed, not inherited) or the value of the inheritance at 6 months out if it has yet to be distributed.

[Anonymous]

@Lucci, yes the $5000 at the value at the alternative date. However the point of the alternative date is to hope for a lower FMV. IF the value at the alternative date is higher than the FMV at date of death, you have to use the FMV at the date of death. (However if the item is distributed prior to the 6 months then you use the value at distribution. From the wording of the problem it does not appear that it was distributed.)

[Author]

Replies