Question

Problem 14-48 (LO. 3) Dan bought a hotel for $12,600,000 in January 2014. In May 2018, he died and left the hotel to Ed. While Dan owned the hotel, he deducted $289,000 of cost recovery. The fair market value in May 2018 was $12,800,000. The fair market value six months later was $12,850,000. a. What is the basis of the property to Ed? Since the alternate valuation date cannot be elected, Ed's basis is $ 2,800,000 X. Feedback Check My Work For inherited property, both unrealized appreciation and decline in value are taken into consideration in determining the basis of the property for income tax purposes. Contrast this with the carryover basis rules for property received by gift. b. What is the basis of the property to Ed if the fair market value six months later was $12,500,000 (not $12,850,000) and the objective of the executor was to minimize the estate tax liability? Assume an estate return is filed. If the alternate valuation date is elected by the executor, Ed's basis for the hotel would be $ 2,500,000 X. Feedback

Answer 1

a: $ 12,800,000 The basis of property that is acquired from a decedent is its fair market value at the date of death. Dan's adjusted basis is not relavant. The alternative Valuation date ( six months after death) and amount $ 12,850,000 can not be used in this case. bi $12,500,000 Ik the alternative Valuation date can be elected by the executor the Ed's basis for hotel would be $ 12,500,000