ugh
Max died in 2014. His estate elected a December 31 tax year. His estate received the following amounts in 2014: $10,000 in dividends from ABC Corp.; $50,000 in life insurance on the life of Max; and $100,000 in proceeds on the sale of vacant land. Max had purchased the land a number of years earlier for $20,000. The $100,000 sales price was $10,000 more than the $90,000 fair market value claimed by the estate on its estate tax return. The estate did not elect alternate valuation on its estate tax return. What is the amount of taxable income that should be reported by the estate for 2014?
A. $140,000
B. $20,000
Answer (B) is correct.
Except as otherwise provided, the taxable income of an estate is computed in the same manner as that of individuals. The dividends are income to the estate if earned, but not collected, by the decedent before death. Life insurance proceeds are included in the gross estate, but not taxable income. The estate’s basis in the land is its fair market value at the date of death. The sale of the land produces a capital gain of $10,000 ($100,000 selling price – $90,000 basis). Therefore, the total taxable income of the estate before deducting the personal exemption is $20,000 ($10,000 + $10,000).
C. $70,000
D. $90,000
.