Gary inherited a Maine summer cabin on 10 acres from his grandmother. His grandp
ID: 2562214 • Letter: G
Question
Gary inherited a Maine summer cabin on 10 acres from his grandmother. His grandparents originally purchased the property for $500 in 1950 and built the cabin at a cost of $10,000 in 1965. His grandfather died in 1980 and when his grandmother recently passed away, the property was appraised at $550,000 for the land and $750,000 for the cabin. Since Gary doesn’t currently live in New England, he decided that it would be best to put the property to use as a rental. What is Gary’s combined basis in both the land and cabin?
Explanation / Answer
Gary’s Basis
Land 550,000
Cabin 750,000
Explanation:The basis of inherited property is the fair market value on the date of death or, if elected by the estate, thealternate valuation date if less. Consequently, Gary’s basis will be $550,000 in the land and $750,000 forthe cabin.
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