Faith Inherits an Undivided Interest in a Parcel of Land

question 43

Essay

Faith inherits an undivided interest in a parcel of land from her father on February 15, 2012. Her father purchased the land on August 25, 1985 and his basis for the land was $325,000. The fair market value of the land is $12,500,000 on the date of her father's death and is $11,000,000 six months later. The executor elects the alternate valuation date. Faith has nine brothers and sisters and each inherited a one-tenth interest.

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Definitions:

Book Value

The net value of an asset as recorded on the balance sheet, calculated by original cost minus depreciation.

Gain Or Loss

The financial result that occurs when the selling price of an asset differs from its original purchase price, where a higher selling price results in a gain and a lower selling price results in a loss.

Disposal

The process of getting rid of something, especially by throwing it away or by selling it.

Accumulated Depreciation

Accumulated depreciation is the total amount of depreciation expense that has been recorded for an asset since it was put into use, reducing its book value on the balance sheet.