Beverly Bergman purchased land for $30,000 in 2005. The land was valued at $180,
ID: 2461158 • Letter: B
Question
Beverly Bergman purchased land for $30,000 in 2005. The land was valued at $180,000 on April 15, 2015, when Beverly died. Her son Jack inherited the land. Six months later, on October 15, 2015, the property was valued at $170,000. What is Jack's basis in the land? If the executor of Beverly's estate elected the alternate valuation date, what is Jack's basis? If the executor elected the alternate valuation date but distributed the property on July 21, 2015, what would be Jack's basis? If the executor elected the alternate valuation date but distributed the property on November 19, 2015, what would be Jacks basis? If Jack sells the property on December 22, 2015, will he have short-term or long-term gain or loss?Explanation / Answer
As per section 2 (42A) of Income Tax Act, 1961 in case of gift or inheritance or liquidation of a company or under irrevocable trust, the period for which the asset was held by the previous owner is included.
Further as per section 49 of Income Tax Act,the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it.
a) The previous owner cost is taken as $ 30,000 and date of acquisition is 2005.
b) The assets which are disposed off that are difference between the alternative valuation date and the date of death are valued on disposition date if alternate valuatkion date is to be selected.
e) If Jack sells the property on Dec 22,2015 then it is long term capital gain bebause it is held more than 1 year.
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