David died testate in 2017 and he devised real estate to son

David died testate in 2017, and he devised real estate to son Jack. The value as finally determined for federal estate tax purposes of the real estate was $1,000,000. David had purchased the real estate for $200,000 cash five years before. David’s estate paid a total federal estate tax of $4,000,000, with the estate tax attributable to the real estate being $300,000. The Personal Representative of David’s estate sold the property for $750,000 nine months after the decedent’s death in order to pay administration expenses and federal estate taxes, there being insufficient assets to cover all expenses and taxes The estate’s gain or loss realized is a. $550,000short-term capital gain b. $250,000 short-term capital gain c. $550,000 long-term capital gain d. $250,000 long-term capital loss e. none of the above

My answer is (b) 250,000 short term-loss 1,000,000value -750,000.00sold price. Am I on the correct path and if not could you explain my error. Thanks.

Solution

Sales Price $750,000

FMV of real estate $1,000,000

Long term Capital loss $250,000

d. $250,000 long term capital loss.

Any property inherited has automatically holding period as long term, thus the loss will be long term capital loss