Mary inherits an interest in Laser Partnership from her Aunt Lillian during 2013.The fair market value of the interest as of the primary valuation date is $28,000.Aunt Lillian's adjusted basis was $16,000.What is Mary's initial basis and holding period in the partnership interest if she sells the interest seven months after inheriting it?
A)$16,000, short-term.
B)$16,000, long-term.
C)$28,000, short-term.
D)$28,000, long-term.
E)Both depend on whether it is sold at a gain or a loss.

Question

Quizplus · Accepted Answer

Mary's initial basis in the partnership interest is equal to Aunt Lillian's adjusted basis at the time of the transfer ($16,000) under the rules for inherited property. Because Mary held the interest for less than one year before selling it, the holding period is short-term. The fair market value of the interest at the time of the inheritance is only used to determine any potential capital gain or loss when the interest is sold.

Mary Inherits an Interest in Laser Partnership from Her Aunt