Question

Ed and Cheryl have been married for 27 years. They own land jointly with a basis of $300,000. Ed dies in 2018, when the fair market value of the land is $500,000. Under the joint ownership arrangement, the land passed to Cheryl.

a. If Ed and Cheryl reside in a community property state, what is Cheryl's basis in the land?

A. $300,000

B. $400,000

C. $500,000

D. $250,000

Answer 1

c. In a community property state, the surviving spouse's basis in the property is adjusted to the fair market value at the date of death.

Step-by-step explanation:

In a community property state, when one spouse dies and leaves property to the surviving spouse, the surviving spouse's basis in the property is typically adjusted to the fair market value of the property at the date of death. In this case, Ed and Cheryl own land jointly with a basis of $300,000 and the fair market value of the land is $500,000 at the time of Ed's death.

Therefore, Cheryl's basis in the land would be $500,000, option C.