Question

Tripp, age 80 and in poor health, owns investment land with an adjusted basis of $50,000. He is considering transferring it to Helen, his niece. Regarding Helen's income tax position, which of the following statements is true? (Assume neither gift tax nor estate tax would be due and that the property is not expected to change in value.)

A. Helen will assume Tripp's adjusted basis of $50,000 in the investment land.

B. Helen will receive a step-up in basis to the fair market value of the investment land.

C. Helen's income tax position will not be affected by the transfer.

D. Helen will need to pay income tax on the transfer.

Answer 1

Helen will receive a step-up in basis to the fair market value of the investment land.

Step-by-step explanation:

B. Helen will receive a step-up in basis to the fair market value of the investment land.

When Tripp transfers the investment land to Helen, she will receive a step-up in basis to the fair market value of the property at the time of transfer. This means that Helen's new adjusted basis for tax purposes will be the fair market value of the property when she received it.

Therefore, statement B is true.