Monte inherited 1,000 shares of Corporation Zero stock from his father who died on March 4 of the current year.His father paid $30 per share for the stock on September 2,2005.The FMV of the stock on the date of death was $50 per share.On September 4 this year,the FMV of the stock was $55 per share.The executor did not elect the alternate valuation date.Monte sold the stock for $65 per share on December 3.What is the amount and nature of any gain or loss?
A)$10,000 LTCG
B)$35,000 LTCG
C)$15,000 LTCG
D)$15,000 STCG

Question

Quizplus · Accepted Answer

The basis for inherited stocks is their fair market value (FMV) on the date of death. In this case, Monte inherited the stock at a cost basis of $50 per share. When he sells the stock in December for $65 per share, he has a long-term capital gain (LTCG) of $15 per share ($65 - $50). Since he held the stock for more than one year, the gain is considered a LTCG.

Note: The purchase price of $30 per share that Monte's father paid in 2005 is irrelevant for tax purposes, as the basis for inherited assets is always their FMV on the date of death. The FMV of $55 per share on September 4 is also irrelevant since the executor did not elect to use the alternate valuation date.

Monte Inherited 1,000 Shares of Corporation Zero Stock from His