Emma gives 1,000 shares of Green, Inc.stock to her niece, Margaret.Emma's adjusted basis for the stock is $200,000 and the fair market value is $300,000.Seven months after the gift, Margaret is killed in an airplane accident.Emma inherits the stock which then is worth $350,000.What is the adjusted basis of the inherited stock to Emma?

Question

Quizplus · Accepted Answer

When Emma gives the stock to her niece, Margaret, it is considered a gift. This means that Margaret's basis for the stock will be the same as Emma's adjusted basis of $200,000.

When Margaret dies and Emma inherits the stock, the basis for the stock will be adjusted to its fair market value at the time of Margaret's death, which is $350,000. This is known as a stepped-up basis.

Therefore, Emma's adjusted basis for the inherited stock is $350,000.

Emma Gives 1,000 Shares of Green, Inc