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:

Headright System

A land grant policy that allocated parcels of land to settlers and investors who financed the passage of indentured servants to the Americas, prevalent in the 17th century.

Pilgrims

Early settlers of the Plymouth Colony in present-day Massachusetts, known for their 1620 voyage aboard the Mayflower seeking religious freedom.

Cape Cod

A geographic cape extending into the Atlantic Ocean from the southeastern corner of mainland Massachusetts, in the northeastern United States.