In June 2008,Debra makes a gift of securities (basis of $613,000;fair market value of $913,000)to her uncle,upon which a gift tax of $60,000 is paid.The uncle dies in July 2009,when the securities are worth $950,000.Under the terms of the uncle's will,the securities return to Debra.Debra's income tax basis in the securities is:

Question

Quizplus · Accepted Answer

When Debra gifted the securities to her uncle, the fair market value was $913,000, and she paid a gift tax of $60,000 on that amount. Therefore, her uncle's basis in the securities was $913,000. When her uncle died, the securities were worth $950,000, which becomes Debra's new basis in the securities as per the basis adjustment rules for inherited property. Therefore, option C is the correct answer.

In June 2008,Debra Makes a Gift of Securities (Basis of $613,000;fair