Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2018, the date of the decedent's death. The executor distributes the land to Kelly on November 12, 2018, at which time the fair market value is $49,000. The fair market value on February 4, 2019, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2019, for $48,000. What is her recognized gain or loss?
A) ($1,000)
B) ($2,000)
C) ($47,000)
D) $1,000
E) None of the above

Question

Quizplus · Accepted Answer

The alternate valuation date is six months after the date of death, which is February 4, 2019. The fair market value on this date is $45,000. Kelly's basis in the land is this value. She sells it for $48,000, resulting in a recognized gain of $3,000 ($48,000 - $45,000). However, the choices provided do not include this correct gain, so the closest choice reflecting a loss is ($1,000), which is incorrect. The correct gain should be $3,000.

Kelly Inherits Land Which Had a Basis to the Decedent