Alice Kemper is the sole shareholder in a closely held business. She sold her bu

Question

Alice Kemper is the sole shareholder in a closely held business. She sold her business to her key employee, Tom, in return for an agreement to pay an annunity as long as she lives. At Alice’s death, Tom’s basis in the business is equal to the

a.   Fair market value of the business on the date Alice died

b.   Amount of annuity payments made during Alice’s lifetime

c.   Present value of payments to be made over Alice’s expected lifespan when the agreement was made

d.   Future value of payments to be made over Alice’s expected lifespan when the agreement was made

Explanation / Answer

Lice is sole shareholder of closely held business. she sold teh business to her employee one of the employee in return for an agreement to pay an annunity as long as she lives. After death of Alice, the basis of business is equal to Present value of payments to be made over Alice’s expected lifespan when the agreement was made.

Option (C) is correct answer.

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