In April 2013, Tim makes a gift of real estate (basis of $900,000; fair market value of $800,000) to his aunt. After the gift, the aunt makes $50,000 worth of capital improvements to the property. The aunt dies in March 2014, when the property is worth $840,000. Under the aunt's will, the realty passes to Tim. Tim's income tax basis in the property is:

Question

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When the aunt dies, the property receives a step-up in basis to its fair market value at the date of her death, which is $840,000.

In April 2013, Tim Makes a Gift of Real Estate