Impact of the 2001 Act (EGTRRA) Self-Quiz

 

 

 

 

 

 

 

 

Rebecca died unexpectedly last June. At the time, she still lived in the home she and her late husband, Arthur, had purchased in a Denver suburb in 1969. The house cost $15,000. Today, homes on her street sell for $500,000 to $600,000 and Rebecca’s home recently appraised for $560,000. Her will left the home to her granddaughter, Francine. Francine left Denver after high school graduation and has no desire to live there again. Accordingly, she decided to immediately sell the house and got $525,000 for it.
Choice 1 The basis of the house is $15,000.
Choice 2 The basis of the house is $525,000.
Choice 3 The basis of the house is $560,000.
Rebecca died unexpectedly last June. At the time, she still lived in the home she and her late husband, Arthur, had purchased in a Denver suburb in 1969. The house cost $15,000. Today, homes on her street sell for $500,000 to $600,000 and Rebecca’s home recently appraised for $560,000. Her will left the home to her granddaughter, Francine. Francine left Denver after high school graduation and has no desire to live there again. Accordingly, she decided to sell the house and got $525,000 for it.
Choice 1 Francine’s taxable gain on the sale is $510,000.
Choice 2 Francine’s taxable gain on the sale is actually a loss of $35,000.
Choice 3 Francine’s taxable gain on the sale is zero.
Ryan died unexpectedly in March 2010. For many years, Ryan had split his time between Minnesota and a second home in Palm Beach, Florida. He purchased the Minnesota home in 1985 for $136,000. He bought the Palm Beach home in 1995 for $640,000. Today, they are worth, $350,000 and $1,200,000, respectively. Ryan’s will left both homes to his sister, Janice. Janice has lived in Atlanta for many years and has no desire to use either of the homes. As such, she intends to sell them.
Choice 1 The basis for computing a future sale is $1,300,000.
Choice 2 The basis for computing a future sale is $776,000.
Choice 3 The basis for computing a future sale is $1,550,000.

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