Paul was divorced from his spouse, Patricia, late last year. As part of the property settlement agreement, Paul agreed to transfer his interest in a residential real estate tract to Patricia. Paul's cost basis in this real estate tract was $50,000. The tract was appraised at a fair market value of $100,000 at the time of its transfer to Patricia. Which of the following income tax implications is true of Paul's transfer of the real estate to Patricia?
A)
Paul's basis in the real estate is carried over to Patricia for income tax purposes.
B)
Paul must recognize the gain on the real estate at the time of transfer at ordinary income rates.
C)
Paul is allowed a deduction equal to the excess of the fair market value over the basis in the property.
D)
Patricia receives a basis in the real estate equal to the fair market value at the time of transfer.