. On January 15 of the current year Kreutzer, an individual, inherited from Glad

Question

. On January 15 of the current year Kreutzer, an individual, inherited from Gladstone shares of stock worth $25,000. Gladstone had purchased the shares in June of the previous year for $20,000, and the shares were worth $23,000 at Gladstone's date of death. The executor of Gladstone's estate did not elect to use the alternate valuation date. In March of the current year, Kreutzer sold the shares for $27,000. As a result of the sale, what will be the amount and type of gain reported by Kreutzer? $4,000 long-term capital gain $2,000 short-term capital gain $7,000 short-term capital gain $2,000 long-term capital gain

Explanation / Answer

The gain or loss on the sale of inherited property is always considered long-term. The basis in inherited property will be equal to the property’s fair value at the date of death, unless the alternate valuation date, six months after the date of death, is elected. Since it was not, Kreutzer’s basis in the property would be $23,000, the value at Gladstone’s death, resulting in a long-term capital gain of the difference between the $27,000 sales price and the basis, or $4000

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