What are the tax implications for a daughter who inherits shares of DEF stock valued at 25, when her deceased father purchased them for 20?

When an individual inherits assets, such as shares of stock, the tax implications typically involve a step-up in basis to the fair market value at the time of the decedent's death. In this scenario, the shares of DEF stock are valued at 25 at the time of the father's passing. Consequently, the daughter assumes a cost basis of 25, which reflects the current market value of the stock rather than the original purchase price of 20.

Additionally, inherited property is generally subject to a long-term holding period regardless of how long the inheritor actually holds the asset. This means that even if the daughter decides to sell the stock shortly after receiving it, any gains realized will be treated as long-term capital gains due to the nature of the inheritance.

Therefore, the correct answer indicates that the daughter assumes a cost basis of 25 and a long-term holding period, aligning with both the tax treatment of inherited assets and the rules regarding holding periods for inherited property.