Robert and Diane, husband and wife, live in Pennsylvania, a common law state. They purchased land as joint tenants in 2013 for $300,000. In 2017, Diane dies and bequeaths her share of the land to Robert. The land has a fair market value of $450,000. What is Robert's adjusted basis for the land?

Question

Quizplus · Accepted Answer

When Diane dies, Robert receives a "step-up" in basis on his share of the property. This means that his adjusted basis for his original share of the property is still $150,000 (half of the original purchase price of $300,000), but his adjusted basis for the share he inherited from Diane is now equal to its fair market value of $450,000. Therefore, Robert's adjusted basis for the entire property is $150,000 (for his original share) + $450,000 (for Diane's share) = $600,000. However, since the question only asks for Robert's adjusted basis for the land (not the entire property), the correct answer is $375,000 (half of the stepped-up basis of $750,000).

Robert and Diane, Husband and Wife, Live in Pennsylvania, a Common