Hi, please kindly help me below question (this question came from Becker R4)
On February 1, Year 4, Hall learned that he was bequeathed 500 shares of common stock under his father's will. Hall's father had paid $2,500 for the stock in Year 1. Fair market value of the stock on February 1, Year 4, the date of his father's death, was $4,000 and had increased to $5,500 six months later. The executor of the estate elected the alternate valuation date for estate tax purposes. Hall sold the stock for $4,500 on June 1, Year 4, the date that the executor distributed the stock to him. How much income should Hall include in his Year 4 individual income tax return for the inheritance of the 500 shares of stock, which he received from his father's estate? [Assume that the estate tax rules in effect for 2011 and forward apply].
The answer is 0 (below is explanation)
There is no income tax on the value of inherited property. The gain on the sale is the difference between the sales price of $4,500 and Hall's basis. Hall's basis is the alternate valuation elected by the executor. This is the value six months after date of death or date distributed if before six months. The property was distributed four months after death and the value that day ($4,500) is used for the basis. $4,500 – $4,500 = 0.
I don't know how did $4500 basis come from?
I know this is a silly question, please kindly help
many many thanks
REG - 69 8/31/2015
FAR - 11/23/2015
FAR - TBD
AUD - TBD
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