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Scenario: Jamie is terminally ill and does not expect to live much longer. Pondering the consequences of her

estate, she decides how to allocate her property to her nephews. She makes a gift of depreciated property (i.e., adjusted basis exceeds fair market value) to Will, a gift of appreciated property (i.e., fair market value exceeds adjusted basis) to Jim, and leaves appreciated property to Sam in her will. Each of the properties has the same fair market value. From an income tax perspective, which nephew is her favorite? Explain your answer.

Help understanding what if she had made the decision earlier and put them into a living trust or if she had put this into her will and they had to go through a probate period before actually getting their properties?

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Here, Sam appears to receive a more favorable tax treatment as he receives the inherited property at thefair market value,... View the full answer

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