In 2006, Roger gives stock valued at $100,000 to Martha. Roger and Martha are not related. In 2008, Martha uses the stock then valued at $110,000 as partial consideration to acquire realty costing $220,000. Pat (her brother) furnishes the remaining $110,000 of consideration. The realty is titled in the names of Martha and Pat as joint tenants with right of survivorship. This year, Martha dies and Pat survives. The realty is valued at $300,000 at Martha's death. How much, if any, of the realty's value will be included in Martha's estate?

Question

Quizplus · Accepted Answer

Martha used the stock, which had appreciated in value to $110,000, as partial consideration to acquire the realty. Therefore, her basis in the realty is $110,000. At her death, the realty is valued at $300,000, so there is a $190,000 ($300,000 - $110,000) unrealized gain in the property. However, since the property was titled as joint tenants with right of survivorship, the entire property passes to Pat at Martha's death, and the unrealized gain is not included in Martha's estate for tax purposes. Therefore, the correct answer is D, $150,000 (which is half of the $300,000 value of the property).

In 2006, Roger Gives Stock Valued at $100,000 to Martha