Ludwig died on April 5,2013.As part of his will,he leaves land for which he paid $6,000 on December 31,2012,to his son Don.On April 5,2013,the land is worth $11,000.However,due to local real estate conditions,the land declines in value.On July 28 it is worth only $10,000; it declines further to $9,000 on October 5 and plunges to $7,000 on December 18.
I.In the absence of any special elections,Don's basis in the land is $11,000.
II.If the executor elects the alternate valuation date and distributes the land to Don on July 28,Don's basis in the land will be $9,000.
III.If the executor elects the alternate valuation date and distributes the land to Don on December 18,Don's basis will be $7,000.
IV.In the absence of any special elections,if the executor distributes the land to Don on October 5,Don's basis in the land will be $9,000.

Question

Quizplus · Accepted Answer

I is correct, as the basis of the land is generally the fair market value at the time of the decedent's death.

II is incorrect, as the alternate valuation date is only applicable if the estate elected it for estate tax purposes, and it would not affect Don's basis in the property.

III is incorrect, as the alternate valuation date is after six months of the decedent's death, and the land's value had already declined to $9,000 by that date.

IV is incorrect, as Don's basis in the land at the time of distribution would still be the fair market value on the decedent's date of death, which was $11,000.

Ludwig Died on April 5,2013