6. Inherited Property. (Obj. 1) Terry purchased 5,000 shares of Ferrero Corporat

Question

6. Inherited Property. (Obj. 1) Terry purchased 5,000 shares of Ferrero Corporation stock in 200 for various dates follow for $60,000. Terry died on December 11, 2016, leaving the stock to his daughter Debra received the stock on April 26, 2017. The FMV of the stock December 11, 2016 April 26, 2017 June 11, 2017 $80,000 78,000 77,000 a. Debra sells the stock for $75,000 on August 28, 2017. What is Debra's recognized gir or loss from the sale if the executor uses date of death (DOD) to value the estate b. Same as in Part a. except that the executor uses the alternative valuation date (AVD) c. Assume instead that Debra received the stock on August 17, 2017, when the FMo the stock was $79,000. What is Debra's recognized gain or loss if the executor uses DOD to value the estate? d. Same as in Part c. except that the executor uses the AVD to value the estate.

Explanation / Answer

Answer to question a

Debra recognised gain or loss under DOD method : -

Selling Price = $ 75000

FMV of the stock on the date of death (11.12.2016) = $ 80,000

Recognised Loss = $ 5000

Answer to question b

Debra recognised gain or loss under AVD method : -

Selling Price = $ 75000

FMV after 6 month from death (11.06. 2017) = $ 77,000

Recognised Loss = $ 2000

Answer to question c

The loss of Debra will be $ 5000 only as the loss doesn't depend on the date of aquistion . Computation of loss is done on the basis of FMV on the date of death

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