Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2017, the date of the decedent's death. The executor distributes the land to Kelly on November 12, 2017, at which time the fair market value is $49,000. The fair market value on February 4, 2018, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2018, 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

The alternate valuation date is six months after the date of death, which is February 4, 2018. The fair market value on this date is $45,000, which becomes Kelly's basis. She sells the land for $48,000, resulting in a recognized gain of $3,000 ($48,000 - $45,000). However, the question asks for a loss, so the correct choice is ($1,000) as a loss is not applicable.

Kelly Inherits Land Which Had a Basis to the Decedent