Estate Planning Flashcards

An heir inherits stock with a $10,000 basis that is worth $100,000 at death. What is the heir's basis under §1014?

Answer: $100,000

Inherited property generally receives a basis equal to fair market value at death (or alternate valuation date).

A donor gifts stock with a $50,000 basis and $30,000 FMV; the donee later sells it for $40,000. What is the donee's gain or loss?

Answer: No gain or loss

Under the dual-basis rule of §1015, a sale between the donor's basis and the FMV at gift produces no gain or loss.

In a community property state, what basis adjustment applies when one spouse dies owning community property?

Answer: Both halves receive a step-up to FMV at death

Section 1014(b)(6) adjusts the basis of both halves of community property when the first spouse dies.

Which inherited asset does NOT receive a step-up in basis because it is income in respect of a decedent?

Answer: A traditional IRA

IRD items such as traditional IRAs and deferred compensation are excluded from the step-up under §1014(c).

A beneficiary pays income tax on IRD that was also subject to federal estate tax. What relief is available?

Answer: An itemized deduction for estate tax attributable to the IRD under §691(c)

Section 691(c) allows a deduction for the federal estate tax attributable to IRD included in income.

Under the SECURE Act, which beneficiary is an eligible designated beneficiary not subject to the 10-year rule?

Answer: The account owner's surviving spouse

Eligible designated beneficiaries include a surviving spouse, minor child, disabled or chronically ill person, and someone not more than 10 years younger.

A non-eligible designated beneficiary inherits an IRA in 2025. By when must the account generally be fully distributed?

Answer: By the end of the 10th year after the owner's death

Most non-spouse designated beneficiaries must empty inherited accounts by the end of the 10th year after death.