Question

At his death, on January 1, 2012, Morris owned shares of ABC Corporation common stock, with a fair market value of $50 per share, which he had purchased in 2001 for $25 per share. If Morris' executor elected to value the estate by using the alternate valuation date, but then sold the shares through a broker-dealer on May 15, 2012 at $40 per share, what is the estate's basis per share for estate tax purposes?

1) $50
2) $15
3) $40
4) $125

Answer 1

The estate's basis per share for estate tax purposes is the actual sales price of the stock, which is $40 per share, because the stock was sold before the alternate valuation date.

Step-by-step explanation:

The estate ultimately sold Morris' shares on May 15, 2012 at $40 per share. When the executor elects to use the alternate valuation date, the basis of the stocks for estate tax purposes becomes the fair market value on that alternate valuation date, unless the stock is sold before this date. In this scenario, as the stock was sold before the alternate valuation date, the estate's basis for the shares would be the actual sales price, which is $40 per share.