Sally, mother of Tally and Wally, owned 100 acres of undeveloped land when she d

Question

Sally, mother of Tally and Wally, owned 100 acres of undeveloped land when she died on October 1, 2012. Sally had acquired the land in 1978 for $20,000. Sally’s Will was admitted to probate, and the Will specifically devised the 100 acres of undeveloped land to Sally’s children Tally and Wally, as tenants in common. No estate tax return was required to be filed but several appraisals were acquired which all concluded that the fair market value as of the date of Sally’s death was $300,000. Tally and Wally both survived Sally, and the land was distributed to Tally and Wally in 2013 when the property was still worth $300,000. Tally and Wally did not make any improvements to the land, and in 2018, Wally transferred Wally’s undivided one-half interest as tenant-in-common to Tally. At the date of the transfer to Tally, the fair market value of Wally’s undivided one-half interest as tenant in common was $800,000. After the transfer, how much is Tally’s basis in the 100 acres of undeveloped land?

                a.             $300,000

                b.             $550,000

                c.             $950,000

                d.             $325,000

Explanation / Answer

The answer is (c) $950,000.

This is because the property which Wally transferred, i.e., one-half of the property, would be reassessed to the current value which is $800,000 and the share of Tally would remain at $150,000 (one half of $300,000). These two sum up to $950,000.

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