Here is a fun one:
Jan Livingston passed away on February 1, Year One. In her will, she left securities and her investments that had cost her $11,000 to her nephew Ron. The fair value of these securities at the date of death was $15,000. However, the securities were only worth $14,000 when conveyed to Ron on June 9, Year One. The executor to the estate chose the alternative valuation date. The value of the securities on August 1, Year One, was $13,000. Ron held the securities until March 3, Year Two, and sold them for $17,000. What gain should Ron report in Year Two as a result of this sale?
A $6,000
B $4,000
C $3,000
D $2,000
The basis of inherited property is normally its fair value at the date of the previous owners death. However, the executor to the estate has the right to choose an alternative date for valuation purposes. That is the date of conveyance or six months after death, whichever comes first. Because Ron received these securities prior to the six-month date, the value of $14,000 when received is used. For income tax purposes, the gain is $3,000 ($17,000 sales price less $14,000 tax basis).
FAR 65, 70, 78
REG 64, 76
BEC 70, 80
AUD 81
Ethics 96
Péter un plomb
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