Jill’s will states in part “I give, devise and bequeath the sum of $10,000 to Ma

Question

Jill’s will states in part “I give, devise and bequeath the sum of $10,000 to Mary”. Jill’s personal representative, being short of cash, distributes 100 shares of xyz corporation to Mary in satisfaction of her bequest. On date of distribution the 100 shares of XYZ Corporation stock are worth $10,000. The estate’s basis in the stock is $5,000. This transaction results in

a.        realization and recognition of $5,000 capital gain by the estate.

b.        Mary will taxed on ordinary income of $5,000 assuming there is enough DNI to cover this amount.

c.         Mary will be taxed on ordinary income of $10,000 assuming there is enough DNI to cover this amount.

d.        Mary will not be taxed because she received specific property, i.e., the XYZ stock, instead of cash.

Explanation / Answer

WORTH OF THE SHARES = 10000

BASIS FOR THE SHARES= -5000

CAPITAL GAIN = 5000.

BUT WHEN THE STOCK WILL BE SOLD THAN TAX HAVE TO BE PAID.

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