Jamahl and Indira are married and live in a common law state. They jointly own real property with an adjusted basis of $200,000. When the property has a FMV of $450,000, Jamahl dies leaving all of the property to Indira. If she later sells the property for $700,000, what is Indira's gain on the sale?
A) $250,000
B) $475,000
C) $375,000
D) $500,000
C) $375,000
$700,000 amount realized - $325,000 basis = $375,000. Inherited basis is 1/2 × $450,000 = $225,000. The basis of her half is 1/2 of $200,000 = $100,000. Her total basis is $325,000.
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