) Alice Kemper is the sole shareholder in a closely held business. She sold her
ID: 2785823 • Letter: #
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
since alice is the only shareholder after she dies the bais would be equal to the fair market value of the business regardless of the aannuties paid because the agreement decreed to pay annuties as long as she lived in lieu of the entire shareholding hence option a is the answer.
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