Liam and Isla Are Husband and Wife and Have Always

question 116

Multiple Choice

Liam and Isla are husband and wife and have always lived in a community property state. At the time of Isla's prior death, part of their community property includes: $\begin{array}{lcc} & \text { Adjusted } & \text { Fair Market } \\&\text { basis } & \text { Value } \\\text { Stock in Scarlet Corporation } & \$ 2,000,000 & \$ 1,000,000 \\\text { Apartment building } & 3,000,000 & 6,000,000\end{array}$ Under Isla's will, all of her property passes to Liam. After Isla's death, Liam's income tax basis in this property is:

• A)$2,500,000.
• B)$3,500,000.
• C)$7,000,000.
• D)$8,000,000.
• E)None of the above.

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Definitions:

Discount Rate

The interest rate used to determine the present value of future cash flows.

Promissory Notes

Written promises to pay a specified sum of money to a specified person at a specified time.

Compounded Monthly

Interest calculation method where interest is added to the principal balance monthly, affecting future interest computations.

25 Years

A term often referring to the duration of a loan or mortgage, indicating the time over which repayments are to be made.