What is Tobin's basis in the land he inherited from his father?

What is Tobin's basis in the land he inherited from his father?

• A. $19,000
• B. $25,000
• C. $300,000
• D. $325,000

Answer: (C)

Tobin's basis in the land he inherited from his father is typically determined by the fair market value (FMV) of the property at the date of the father's death. Under U.S. tax law, inheritances receive a "step-up" in basis, meaning that the beneficiary's basis in the inherited property is the FMV at the time of inheritance rather than the original purchase price the decedent paid for the property. Assuming Tobin's father passed away and the FMV of the land at that time was appraised at $300,000, this amount establishes Tobin's basis in the land. This basis is important for calculating future capital gains taxes if Tobin decides to sell the land, as the basis will be used to determine the gain or loss on the sale. While the other values presented might represent different scenarios such as the original cost of the property or other speculative valuations, they do not reflect the FMV at the date of inheritance, making them incorrect choices for determining Tobin's basis in the land.

Tobin's basis in the land he inherited from his father is typically determined by the fair market value (FMV) of the property at the date of the father's death. Under U.S. tax law, inheritances receive a "step-up" in basis, meaning that the beneficiary's basis in the inherited property is the FMV at the time of inheritance rather than the original purchase price the decedent paid for the property.

Assuming Tobin's father passed away and the FMV of the land at that time was appraised at $300,000, this amount establishes Tobin's basis in the land. This basis is important for calculating future capital gains taxes if Tobin decides to sell the land, as the basis will be used to determine the gain or loss on the sale.

While the other values presented might represent different scenarios such as the original cost of the property or other speculative valuations, they do not reflect the FMV at the date of inheritance, making them incorrect choices for determining Tobin's basis in the land.