Question

The Abelinda Estate distributed some land, basis of $15,500 and fair market value of $18,000, to beneficiary Bartholomaus. The estate is subject to a 28% marginal income tax rate, and Bartholomaus is subject to a 32% marginal rate. What are the tax savings if the executor of the estate elects that the entity recognize the related realized gain

Answer 1

$100

Step-by-step explanation:

When a estate is being distributed, you must always calculate the distribution based on the fair market value of the assets.

the realized gain = fair market value of the land - land basis = $18,000 - $15,500 = $2,500

if the executor of the state decides that the estate recognizes the gain, then the taxes = $2,500 x 28% = $700

if the executor of the state decides that Bartholomaus recognizes the gain, then the taxes = $2,500 x 32% = $800

the difference resulting from choosing the estate = $800 - $700 = $100 saved