What is Mary's basis in the diamond ring left to her from Neelam?

The basis of property received by inheritance is generally determined by the fair market value (FMV) of that property on the date of the donor's death. In this case, if the diamond ring left to Mary from Neelam had a FMV of $18,000 at the time of Neelam's death, then Mary’s basis in the ring is indeed $18,000. This is because the tax code allows the recipient of an inherited asset to take a step-up in basis to the FMV at the time of the decedent's death, which is a critical consideration for capital gains tax purposes should Mary later decide to sell the diamond ring.

To summarize, Mary's basis in the diamond ring is $18,000 based on the fair market value at the date of inheritance, aligning with the rules governing the basis of inherited property.