Question

Harry inherited 100 shares of stock from his aunt upon her death. Harry's aunt purchased the stock 10 years ago for $20 per share. The stock was worth $50 per share on the date she died. What is the amount of Harry's basis in the stock?

A. $5,000
B. $2,000
C. $50
D. $20

Answer 1

Harry's basis in the stock is the value of the stock on the date of his aunt's death, which is 100 shares at $50 per share, totaling $5,000. The correct option is A.

Step-by-step explanation:

The amount of Harry's basis in the stock is determined by the value of the stock on the date of his aunt's death, not by what she paid for it. Since the stock was worth $50 per share when she passed away, and Harry inherited 100 shares, we multiply the per-share value by the number of shares to calculate the basis.

The calculation is as follows:

• Number of shares: 100
• Value per share at the date of death: $50
• Total basis: 100 shares × $50 per share = $5,000

Therefore, Harry's basis in the inherited stock is $5,000.