Please explain me why there is contrast in these two question explanation.
Hall was bequeathed 500 shares of common stock under his father’s will. Hall’s father had paid $2,500 for the stock 10 years ago. Fair market value of the stock on February 1, Year 1, 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 1, the date that the executor distributed the stock to him. How much income should Hall include in his individual income tax return for the inheritance of the 500 shares of stock that he received from his father’s estate?
$5,500
Incorrect B.
$4,000
C.
$2,500
D.
$0
Explanation:
If the alternate value is chosen and the property is disposed of before the 6-month period has expired, that property shall be valued at the fair market value at the date of disposition, the sale price. Since Hall sold the stock before the 6-month period ended, his basis equals his sale price, and no gain or loss exists.
#2 Natalie inherited land from her Uncle Josh, who died January 3, Year 4. The basis to Josh was $1,000,000 and the value on January 3, Year 4, was $7,200,000. On July 3, Year 4, the value was $7,600,000. When the land was distributed to Natalie on June 3, Year 4, the value was $7,400,000. This land was Josh's entire estate. Natalie's basis for the estate is:
A.
$1,000,000.
B.
$7,200,000.
Incorrect C.
$7,400,000.
D.
$7,600,000.
You answered C. The correct answer is B.
In order to select the alternate valuation date of July 3, the valuation must be lower, resulting in reduced estate tax liability. Since the market value has risen, the value at time of death ($7,200,000) must be selected.
.