Ed Gives Steve Land with an Adjusted Basis of $40,000

question 98

Multiple Choice

Ed gives Steve land with an adjusted basis of $40,000 and an FMV of $90,000. Ed paid no gift tax. Ed then inherits the same land back from Steve at Steve's death eight months later. At Steve's death, the land is worth $120,000. Ed's basis in the land becomes

• A)$120,000.
• B)$90,000.
• C)$40,000.
• D)cannot be determined from the facts given

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Definitions:

Flexibility

The ability of an entity or system to adapt to changes, variability, or uncertainties in its operational environment.

Indirect Interest Costs

Expenses related to obtaining financing (such as legal, administrative, and underwriting fees) that do not directly involve the payment of interest.

Combination Leases

Combines some aspects of both operating and financial leases. For example, a financial lease that contains a cancellation clause—normally associated with operating leases—is a combination lease.

Operating Leases

Leasing agreements for assets where the lessor retains ownership, and the lessee uses the asset for a specified period.