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?

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Quizplus · Accepted Answer

When Melody inherited the stock, her basis was equal to the fair market value of the stock on the date of her mother's death, which was $65,000 (1,000 shares x $65 per share). Since the estate elected the alternate valuation method, the basis of the stock was adjusted to the FMV on September 4 of the current year, which was $70 per share. Therefore, Melody's basis in the stock was $70,000 (1,000 shares x $70 per share). When she sold the stock for $85 per share, her capital gain was $15 per share, or $15,000 in total.

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