Final answer:
The correct answer is d. home $75,000; rental $100,000, reflecting the step-up in basis for the home at half the date of death value for the spouse's share and full step-up to the date of death value for the rental property owned with the child.
Step-by-step explanation:
The question deals with establishing the new cost basis for inherited assets under common law state rules. When someone dies, his or her assets often get a step-up in basis to the fair market value at the time of death.
In the case of a home owned as joint tenants with rights of survivorship with a spouse, the survivor would receive a step-up basis on the decedent's half of the property's value, so the new cost basis for the home would be $75,000 ($50,000 for the survivor's original half plus $25,000 step-up on the decedent's half, half of the date of death value).
The rental property owned with a child, who did not contribute to the cost, would also receive a step-up in basis for the entire value because the decedent funded the entire purchase.
Therefore, the new cost basis for the rental property is $100,000. The correct answer is d. home $75,000; rental $100,000.