Question

Dan bought a hotel for $2,600,000 in January 2015. In May 2019, he died and left the hotel to Ed. While Dan owned the hotel, he deducted $289,000 of cost recovery. The fair market value in May 2019 was $2,800,000. The fair market value six months later was $2,850,000

Answer 1

Consider the following calculations and explanations

Step-by-step explanation:

What is the basis of the property to Ed?

$2,800,000.The basis of property that is acquired from a decedent is its fair market value at the date of death.Dan’sadjusted basis is not relevant.

What is the basis of the property to Ed if the fair market value six months later

The alternate valuation date (six months afterdeath) and amount (($2,850,000) cannot be used in this case

was $2,500,000 (not $2,850,000) and the objective of the executor was to mini- mize the estate tax liability?

if the alternate valuation date can be elected by the executor,Ed’s basis for the hotel would be $2,500,000.However, the alternate valuationdate cannot be elected by the executor if this amount exceeds the primaryvaluation date cannot be elected by the executor if this amount exceeds theprimary valuation amount or if the election does not reduce the estate tax liability.A key unresolved issue is whether the election would reduce the amount of theestate tax liability