25 May Question 1. Neal and his wife Faye reside in Texas, a community pr
Question
1. Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate (adjusted basis of $800,000; fair market value of $6 million) and personal property (adjusted basis of $390,000; fair market value of $295,000). Neal dies first and leaves his estate to Faye. What is Faye’s basis in the property after Neal’s death?
a. $800,000 real estate and $295,000 personal property.
b. $800,000 real estate and $390,000 personal property.
c. $3,400,000 real estate and $295,000 personal property.
d. $6,000,000 real estate and $295,000 personal property.
e. None of the above.
2. Robert and Diane, husband and wife, live in Pennsylvania, a common law state. They purchased land as joint tenants in 2010 for $300,000. In 2014, Diane dies and bequeaths her share of the land to Robert. The land has a fair market value of $450,000. What is Robert’s adjusted basis for the land?
a. $300,000.
b. $375,000.
c. $450,000.
d. $750,000.
e. None of the above.
3. Taylor inherited 100 acres of land on the death of his father in 2014. A Federal estate tax return was filed and this land was valued therein at $650,000, its fair market value at the date of the father’s death. The father had originally acquired the land in 1968 for $112,000 and prior to his death he had expended $20,000 on permanent improvements. Determine Taylor’s holding period for the land.
a. Will begin with the date his father acquired the property.
b. Will automatically be long-term.
c. Will begin with the date of his father’s death.
d. Will begin with the date the property is distributed to him.
e. None of the above.
4. Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2014, the date of the decedent’s death. The executor distributes the land to Kelly on November 12, 2014, at which time the fair market value is $49,000. The fair market value on February 4, 2015, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2015, for $48,000. What is her recognized gain or loss?
a. ($1,000).
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