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:

Liquid

Describes an asset's ability to be quickly converted into cash without significant loss in value.

Maturity Date

The maturity date is the specified date on a financial instrument at which the principal (or final payment) is due to be paid to the holder.

Retained Earnings

The portion of a company's net income that is not distributed to shareholders as dividends but is retained by the company to reinvest in its core business or to pay debt.