Abner,age 80 and in poor health,owns investment land with an adjusted basis of $50,000.He is considering transferring it to Stella,his niece.Regarding Stella's income tax position,should the transfer to her be by gift or by inheritance? (Assume neither gift tax nor estate tax would be due,and that the property is not expected to change in value. )

Question

Quizplus · Accepted Answer

If the fair market value of the land is $200,000, the transfer should be by inheritance because Stella will receive a stepped-up basis equal to the fair market value of the land at the time of Abner's death. If the fair market value of the land is $10,000, the transfer should be by gift because Stella will receive a carryover basis equal to Abner's adjusted basis of $50,000. If the fair market value of the land is $50,000, the transfer can be either by gift or by inheritance because the tax consequences are the same.

Abner,age 80 and in Poor Health,owns Investment Land with an Adjusted