1. At the beginning of 2011, Margarets adjusted basis in her 30 percent interest in MP Partnership, a general partnership, was $3,000. During 2011, Margaret did not make any additional contributions to MP Partnership, and Margarets share of MP Partnership liabilities did not change. During 2011, MP Partnership distributed $5,000 to Margaret, and MP Partnership had the following items of partnership income, deduction, gain and loss for 2011:
Taxable income $15,000
Tax exempt interest $6,000
Section 1231 loss ($10,000)
What is Margarets adjusted basis in her partnership interest in MP Partnership at the end of 2011?
2. Facts for Questions 2 and 3. Mr. Grey died on January 1, 2012. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death:
Asset 1. Home in Mr. Grey’s and Mrs. Grey’s (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey’s death and six months after the Mr. Grey’s death.
Asset 2. Publicly traded stocks and bonds solely in , Mr. Greys name that had a fair market value of $3,000,000 on the date of Mr. Greys death and a fair market value of $2,000,000 six months after Mr. Grey’s death.
Asset 3. Undeveloped real estate in Mr. Grey’s name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Greys death and a fair market value of $1,000,000 six months after the date of Mr. Grey’s death.
Asset 4. A condominium in the decedent’s name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Greys death. The condominium was sold by the personal representative of the decedent’s estate for $250,000 four months after Mr. Greys death.
Based on the facts for questions 2 and 3, which of the following options are available to Mr. Greys estate for valuation of the assets includible in the gross estate?
a. The estate may use date of death values or it may elect alternate valuation.
b. The estate must use date of death values.
c. The estate must elect alternate valuation.
d. Valuation is not required as no Federal Estate Tax Return is required to be filed.
3. Facts for Questions 2 and 3. Mr. Grey died on January 1, 2012. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death:
Asset 1. Home in Mr. Grey’s and Mrs. Grey’s (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey’s death and six months after the Mr. Grey’s death.
Asset 2. Publicly traded stocks and bonds solely in , Mr. Greys name that had a fair market value of $3,000,000 on the date of Mr. Greys death and a fair market value of $2,000,000 six months after Mr. Grey’s death.
Asset 3. Undeveloped real estate in Mr. Grey’s name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Greys death and a fair market value of $1,000,000 six months after the date of Mr. Grey’s death.
Asset 4. A condominium in the decedent’s name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Greys death. The condominium was sold by the personal representative of the decedent’s estate for $250,000 four months after Mr. Greys death.
Based upon the facts presented in the fact pattern for questions 2 and 3, what is the amount of Mr. Greys gross estate for federal estate tax purposes?
a. 0.
b. $2,500,000.
c. $3,500,000.
d. $4,250,000.
e. $7,000,000.