My parents passed away a few years ago and left myself, brother and sister their house via some type of trust (I can try to find out what kind if necessary). House was valued at about $750K back then. Worth about $650K now. We want to sell now and was wondering about the tax implications. The house was purchased about 40 years ago for about $40K. Thanks for any input.
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posted: Sep. 14, 2011 @ 2:31a
Without knowing more, the basis may have stepped up to $750k upon your parents death, so no taxes would be owed when you sell at $650k
posted: Sep. 14, 2011 @ 8:19a
Type of a trust is pretty important too. If the house is titled to the trust you may not get the step up basis part, and still owe taxes on $610K of gains. Need more details.
Senior Member - 4K
posted: Sep. 14, 2011 @ 11:13a
hawaiian2002 said: My parents passed away a few years ago and left myself, brother and sister their house via some type of trust (I can try to find out what kind if necessary). House was valued at about $750K back then. Worth about $650K now. We want to sell now and was wondering about the tax implications. The house was purchased about 40 years ago for about $40K. Thanks for any input.Ask the executor of the estate what your basis is in the property. If they don't know, the accountant or lawyer that worked on the estate should know something.
Also, depending on what was done with the house after it was inherited, any loss on the sale would either be non-deductible (if personal property) or deductible (if investment property). I'd suggest hiring a qualified tax preparer who understands the issues around this who can advise you and take the correct position on your tax return.
posted: Sep. 15, 2011 @ 10:24a
Thanks for the replies guys. My sister, who is the "executor" said its a Living Trust. We will be seeing an accountant in a few days for professional help but any other input would be welcome.
posted: Sep. 17, 2011 @ 1:23p
If the living trust was revokable, the basis likely was stepped up to market value at the date of death. Consult Treas. Reg. 1.1014-2(a)(2)&(3). If the trust sells the home, then the trust is required to report the sale on its income tax return (Form 1041) for the year in which the sale was made, subject to the filing requirements for a trust. The settlement agent should issue the Form 1099 to the trust, not the beneficiaries. Good to consult the accountant for details.
Senior Member - 10K
posted: Sep. 17, 2011 @ 1:26p
ME: Is your living trust revocable or irrevocable? PERSON: Depends on who I'm talking to. ME: lol
posted: Sep. 21, 2011 @ 10:26a
According to the title document for the property, this is a Revokable Living Trust. So as I understand it, the basis is stepped up to $750K and if we sell for $650K, we pay no taxes. Would be be entitled to a deduction of $100K (divided by 3)?
posted: Sep. 21, 2011 @ 1:46p
hawaiian2002 said: According to the title document for the property, this is a Revokable Living Trust. So as I understand it, the basis is stepped up to $750K and if we sell for $650K, we pay no taxes. Would be be entitled to a deduction of $100K (divided by 3)?
Don't get greedy
posted: Sep. 21, 2011 @ 2:07p
That's another question for the accountant .
But generally when you sell an investment for a prices less than it's basis, yes you can deduct the loss. As long as this wasnt the personal residence of the people who inherited it, but an "investment property," (even if it was vacant and wasn't rented out) , it sounds deductible. If it was occupied by one or more of the owners it might not be deductible
Your accountant will be able to Determine whether the basis was stepped up to $750k and whether a sale at $650k creates a deduction
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