When does a taxpayer use the FMV of the property received in calculating the basis?
Understand the Problem
The question is asking about the circumstances under which a taxpayer uses the fair market value (FMV) of property received to calculate the basis of that property. It provides multiple-choice options that relate to different scenarios in tax law involving property.
Answer
The FMV at the date of death is used to calculate basis for inherited property.
The final answer is the basis of property received as an inheritance is generally the FMV at the date of the decedent's death.
Answer for screen readers
The final answer is the basis of property received as an inheritance is generally the FMV at the date of the decedent's death.
More Information
When you inherit property, you usually use the FMV as of the date of death as your basis. This is a significant tax advantage as it can alleviate significant capital gains taxes if the value of the property has appreciated over the years.
Tips
A common mistake is confusing the rules for the basis of gifted versus inherited property. Make sure to distinguish them properly as the rules can significantly affect the tax outcome.
Sources
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