Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year. Her mother paid $30 per share for the stock on September 2, 2005. The FMV of the stock on the date of death was $65 per share. On September 4 of the current year, the FMV of the stock was $70 per share. Melody sold the stock for $85 per share on December 3. The estate qualified for, and the executor elected, the alternate valuation method for these and other assets in the estate. An estate tax return was filed. What was Melody's basis in the stock on the date of the sale?

Question

Quizplus · Accepted Answer

Under the alternate valuation method, the basis of inherited property is the fair market value six months after the date of death, which was $70 per share in this case. Therefore, Melody's basis in the stock is $70,000 (1,000 shares x $70).

Melody Inherited 1,000 Shares of Corporation Zappa Stock from Her