Final answer:
Kelvin will report a $3,000 long-term capital gain from the sale of Blackacre, since inherited property gets a step-up in basis to the FMV at the date of the decedent's death, and the gain is considered long-term regardless of the actual holding period. D) $3,000 long-term capital gain
Step-by-step explanation:
When Kelvin sold Blackacre for $48,000 after inheriting it from his father Tim, the amount and type of income he would report depends on the fair market value (FMV) on the date of Tim's death and the selling price. Since the FMV of Blackacre as of the date of Tim's death was $45,000 and Kelvin sold the property for $48,000, he would realize a gain of $3,000. Under the step-up in basis rules, the beneficiary's basis in inherited property is the FMV of the property on the date of the prior owner's death. In this case, Kelvin's basis in Blackacre would be $45,000, and since he sold it for $48,000, he would report a $3,000 gain on the sale.
The type of gain is determined by the holding period. Because he sold the property within one year of inheriting it, normally this would be considered a short-term capital gain. However, for inherited assets, the holding period is automatically considered long-term. Therefore, Kelvin should report a $3,000 long-term capital gain.
Based on the given options, the correct answer is D) $3,000 long-term capital gain.