Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4,2015,the date of the decedent's death.The executor distributes the land to Kelly on November 12,2015,at which time the fair market value is $49,000.The fair market value on February 4,2016,is $45,000.In filing the estate tax return,the executor elects the alternate valuation date.Kelly sells the land on June 10,2016,for $48,000.What is her recognized gain or loss?
A)($1,000)
B)($2,000)
C)($47,000)
D)$1,000
E)None of the above

Question

Quizplus · Accepted Answer

Since the executor elects the alternate valuation date, the basis of the inherited property becomes the fair market value on the date of the decedent's death, which is $50,000. Kelly sells the property for $48,000, resulting in a loss of $2,000. However, the loss is limited to the difference between the sale price and the fair market value on the date of distribution, which is $49,000. Therefore, Kelly's recognized loss is $1,000 ($49,000 - $48,000).

Kelly Inherits Land Which Had a Basis to the Decedent