Question

For the scenario described (d. $0; $410,000), what is Lorraine's basis for the house after the transfer?

A) $0
B) $410,000
C) $410,000 plus any gain recognized by Andrew
D) The basis is determined based on fair market value at the date of the transfer.

Answer 1

Lorraine's basis for the house after the transfer is $410,000. This is assuming a regular transfer where the transferee's basis is the same as the transferor's at the time of transfer.

Step-by-step explanation:

For the scenario described, which involves a transfer of a house valued at $410,000 with a basis of $0, Lorraine's basis for the house after the transfer would be option B) $410,000. Generally, in a transfer situation like this, the basis of the property to the transferee is the same as it would be in the hands of the transferor, except when it comes to gifts where the fair market value is used if lower than the donor's basis, or inheritance where the fair market value at the time of the decedent's death is used. However, since the scenario provided does not specify that the transfer is a gift or an inheritance, we assume a regular transfer where the basis remains the same, thus, Lorraine's basis in the house is the value at the time of the transfer, $410,000.