Jessica owns investment land currently worth $8,000,000. She paid $3,000,000 for the land 10 years ago. She expects that the land will probably increase in value to at least $12,000,000 before she dies. She has not previously given any taxable gifts.
a. If Jessica gives the land to her son Mark now, what basis will he use for determining gain when he sells the land?
b. If Jessica dies in 2018 and bequeaths the land to her son, what basis will he use for determining gain when he sells the land?
c. If Jessica’s son plans to keep the land instead of selling it, should she give it to him now or bequeath it to him? Explain the reason for your choice.