Basis - Sample Questions 1 - 5

1. Laura received a jewelry collection from her grandparents as a gift. Laura's grandparents purchased the jewelry for $20,000 about 10 years ago. The FMV at the date of the gift was $15,000. If Laura sells the jewelry collection for $18,000, which of the following is TRUE?

A) Laura will have a realized gain of $3,000.
B)
Laura will have a realized loss of $2,000.
C)
Laura will have no gain or loss.
D) Laura has an offsetting transaction that results in a net $1,000 gain.

2.
Chris received 100 shares of XYZ stock from his brother Matt. Matt's adjusted basis in the stock is $20,000, and the FMV at the date of the gift was $80,000. Matt paid $10,000 in gift tax. What is the new basis to Chris?

A) $30,000
B)
$27,500
C)
$25,000
D) $22,500

3. Jeff gifts property to his dying brother Kevin so he can enjoy his last few months. The property has a basis of $5,000 and a FMV of $8,000 at the time of the gift. Kevin dies in six months and passes the property back to Jeff through his will. The FMV at the date of death was $7,000. What is Jeff's cost basis in the property?

A) $3,000
B)
$5,000
C)
$7,000
D) $8,000


4. Pete and Pat, as joint tenants in a community property state, own an investment account with a $120,000 basis. At Pete's death, the account had a FMV of $180,000. What is Pat's basis now that Pete has died?

A) $60,000
B)
$120,000
C)
$150,000
D) $180,000

5. Scott purchased a house and land and made several capital improvements to increase the market value of his investment. Which of the following will increase his original basis in the home and land?

I. Extending utility service lines
II. Legal Fees incurred for defending the title
III. Assessment for a sidewalk improvement
IV. New electrical wiring throughout the house

A) I only
B)
I and II only
C)
I, II and III
D) I, II, III and IV


Answer Key


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