R3

Question 1

Tax basis of inherited property when someone dies

Answer 1

Tax basis of inherited property is the FMV at the date of the decedent’s death (unless the alternate valuation date is validly elected). Gain or loss on sale of inherited property is automatically long-term.

Question 2

what FMV to look at if the alternate valuation date is selected for property inherited

Answer 2

If the alternate valuation date is elected, the tax basis of inherited property is the FMV at the earlier of the date the property is distributed or six months after the date of death.

Question 3

FMV if property is gifted

Answer 3

If FMV @ gift date > donor’s basis, use the donor’s basis and holding period.

If FMV @ gift date < donor’s basis, the basis depends on selling price; if selling price > donor’s basis, use basis and holding period of donor

if selling price < donor’s basis,

Question 4

calculate tax basis when stock dividend is rec’d

Answer 4

spread out the stock div across all stocks

ex: 100 stocks @ $55 = $5500
if 10% stock dividend, means u now have 110 stocks. so, original basis/# of shares = 5500/110 = $50/share is the new basis

also, note the holding period for stock dividend is from the date the original shares were acquired

Question 5

installment method for sale of inventory?

Answer 5

never. treated as ordinary income!

Question 6

cost-depletion method?

Answer 6

(Total Cost $/ # estimated units) * # units sold

Question 7

% depletion method?

Answer 7

(# sold * price per unit)*statutaory depletion rate

**limited to 50% of gross income!