Margaret Holloway inherited a parcel of investment land from her late aunt, who had owned it for nine years. Margaret sold the land four months after the date of her aunt's death and realised a gain. How is this gain classified for capital gains purposes?
- ALong-term, because property acquired from a decedent is automatically treated as held for more than one year. Correct
- BShort-term, because Margaret personally held the land for only four months before selling it.
- CLong-term only if Margaret's combined holding period plus her aunt's nine years exceeds one year.
- DShort-term, because the aunt's holding period cannot be tacked on after death.
Why A is correct: Under the inheritance rules, property acquired from a decedent receives automatic long-term treatment on sale, so the heir's actual holding period is irrelevant to classification.
Why B is wrong: This applies the ordinary holding-period count to inherited property, but property acquired from a decedent is treated as held long-term regardless of how long the heir actually owns it.
Why C is wrong: This describes a carryover or tacking concept that applies to gifts, not inheritances; inherited property does not require tacking because long-term treatment is automatic.
Why D is wrong: It is true that the aunt's period is not tacked, but the conclusion is wrong because inherited property is deemed long-term by statute rather than by tacking.