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nch- Microsoft Edge https rblock sod co ims sco che tLMS/Scor Fra esaspx?acc sidsAICCgVz T dw631dr LG4Mc12w&acc; url= https hrblock.csod corn LMS scorm a Select the best answer T Corp. has 1,000 shares of stock outstanding, all owned by Kathi, with a cost basis of $120,000. When Kathi died her stock was valued at $600,000 for estate tax purposes, and remained at that amount for several years. Kathi's adjusted gross estate was $1 million. Funeral expenses and death taxes incurred by the estate were $150,000. The estate redeemed $100,000 of the T stock one year later in order to provide liquidity to the estate. How is the $100,000 in proceeds taxed to the estate? O A. $20,000 dividend to the estate B. $80,000 capital gain to the estate C. $100,000 dividend to the estate O D. No gain or loss to the estate 87% Complete Exit & Resume Later

Explanation / Answer

SOLUTION

The correct answer should be B i.e. $80,000 capital gain to the estate.

Since the Cost basis for 100,000 proceeds

= 100,000*120,000/600,000 = 20,000

So,

Capital gain = 100,000-20,000 = $80,000.

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