Tony died on April 5, 2018. As part of his will, he leaves land that he paid $6,000 for in 2004 to his son Philip. On April 5, 2018, the land is worth $11,000. However, due to local real estate conditions, the land continues to decline 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. In the absence of any special elections,
I.Philip's basis in the land is $6,000.
II.If the executor distributes the land to Philip on July 28, Philip's basis in the land will be $10,000.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Tony died on April 5, 2018. As part of his will, he leaves land that he paid $6,000 for in 2004 to his son Philip. On April 5, 2018, the land is worth $11,000. However, due to local real estate conditions, the land continues to decline 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. In the absence of any special elections,
I.Philip's basis in the land is $6,000.
II.If the executor distributes the land to Philip on July 28, Philip's basis in the land will be $10,000.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

In the absence of any special elections, the basis of inherited property is generally the fair market value of the property on the date of the decedent's death. Therefore, Philip's basis in the land would be $11,000, not $6,000 or the later values as the property declined in value.

Tony Died on April 5, 2018