Basis of Inherited Property

Bill Farmer bought 1,000 acres of farmland for $300,000. When his oldest son married, Bill gave him 400 acres for a farm. When Bill died this year, the remaining 600 acres were divided in Bill’s will between his two younger sons. The 600 acres had a fair market value at Bill’s death of $600,000. Which of the following statements concerning the sons’ basis in the farmland are correct?

(1) The oldest son will have a basis of $120,000 in the 400 acres.
(2) The younger sons will have a basis of $180,000 in the 600 acres.
(3) The younger sons will have a basis of $600,000 in the 600 acres.
(4) The oldest son will have a basis of $400,000 in the 400 acres.

  1.  (1) and (2) only
  2.  (1) and (3) only
  3.  (2) and (4) only
  4.  (3) and (4) only