Question

1. Dan and Jan, a married couple who live in New York, which is not a community property state, purchased undeveloped land in 1995, as tenants by the entirety, paying $140,000 for the land. Their basis remained at $140,000, and on December 2, 2017, Jan died when the property had a FMV of $160,000. Dan’s basis in the property after Jan’s death is

                a.            $70,000

                b.            $140,000

                c.             $150,000

                d.            $160,000             

                e.            $80,000

2. What if in problem 1 they lived in a community property state?

Dan and Jan, a married couple who live in a community property state, purchased undeveloped land in 1995 paying $140,000 for the land. Their basis remained at $140,000, and on December 2, 2017, Jan died when the property had a FMV of $160,000. Dan’s basis in the property after Jan’s death is

                a.            $70,000

                b.            $140,000

                c.             $150,000

                d.            $160,000             

                e.            $80,000

3. Kathleen received land as a gift from her uncle. At the time of the gift, the land had a FMV of $85,000 and an adjusted basis of $110,000 to Kathleen’s uncle. One year later, Kathleen sold the land for $80,000. What was her realized gain or loss on this transaction?

                a.            No gain or loss

                b.            ($5,000)

                c.             $5,000

                d.            $30,000

Answer 1

ANS

2) THE CORRECT ANSWER IS (d).

IF THE DECENDENT AND THE DECENDENT'S SPOUSE OWN PROPERTY UNDER COMMUNITY PROPERTY LAWS, ONE-HALF OF THE PROPERTY IS INCLUDED IN THE DECENDENT'S GROSS ESTATE AND ITS BASIS TO THE SURVIVING SPOUSE IS ITS FMV. THE SURVIVING SPOUSE'S ONE HALF OF THE SHARE OF THE COMMUNITY PROPERTY IS ALSO ADJUSTED TO FMV.

3) THE BASIS FOR GAIN IS THE ADJUSTED BASIS. THE BASIS FOR LOSS IS THE FMV

$80000 - $85000 = ($5000)

THE CORRECT OPTION IS (b).

1) THE CORRECT ANSWER IS (a)