Final answer:
Francine's estate can deduct $16,000 in suspended losses on her final income tax return due to the rules governing passive activities at death. The fair market value, adjusted basis and equity in the property are not directly relevant to the deductibility of these losses.
Step-by-step explanation:
On Francine’s final income tax return, the suspended losses of $16,000 are deductible. This is due to the unique rules that govern passive activity losses at death. Normally, losses from passive activities are only deductible to the extent of passive income; however, upon the taxpayer's death, these suspended losses can be fully deductible on the decedent's final return. The fair market value of the property or the estate tax value (if applicable) does not directly affect the deductibility of the suspended losses.
It is important to note that while the estate tax does come into play for large estates, as indicated by the 2013 LibreTexts reference, Francine's estate does not appear to exceed the threshold for estate tax concerns (assuming the threshold has not significantly decreased since 2013). Therefore, the focus remains solely on the income tax implications of her passive activity property and the suspended losses.
In this scenario, the adjusted basis or the equity in the property are also not relevant to the immediate question of what is deductible on her final income tax return. The presence of suspended losses is the crucial detail, as it allows for their full deductibility with no need to offset them against passive income, which is a departure from the rules that apply before the taxpayer's death.