Hi again John -I'm not sure you are the right expert for this detailed tax question. I thought it would be simpler, but as the layers peel back, not so much. If you're not sure about this, please let me know and I'll move to a tax law expert. I didn't want to continue the last thread for only $30. The scenario: > My aunt, in essence, is buying my 1/2 share of the trust property, of which she holds the other 1/2 interest, as original co-trustee and co-beneficiary in my grandfather's will.> There will be a $250,000 capital gain in property value at time of sale. There will be a deed transfer to my aunt.> I will receive 1/2 the current value of the $450,000 property, $225,000.> Does my aunt share 1/2 of the $250,000 capital gain, leaving me to pay approx. 25% to state and fed on $125,000? > I am giving 1/2 of the $225,000 to my sister. ($112,500 to my only sibling)> I am splitting 1/2 of my 1/2 with my 2 children. ($28,125 ea.)How do I plan to properly, and with least tax due by all involved, to pay the taxes from this transaction.Are there options I should consider? Thanks - Wade
Thank you for requesting me specifically. Please do note that your Neutral Feedback posted negatively impacts me on the prior question. I feel like I completely and correctly answered your question as presented. If you would log in on that prior question and post positive feedback instead it would be appreciated.
This question as presented still leaves a lot to speculate on. I need to know who the present beneficiaries of the Trust are. You say that your aunt is entitled to 1/2 and you are entitled to 1/2. However, later you say your sister is getting 1/2 of the proceeds.
The fact is that to get the property out of the trust and to your aunt it has to be distributed. It can only be distributed by the trustees to the current named beneficiaries. If that is you and your aunt then you would then each own 1/2 interest in the property individually. You would retain the tax basis in the property that stepped up upon your G.F's death. If you then turn around and sell your 1/2 interest then you are responsible for the full capital gain that is due. This would be the case even if you later split the proceeds from the sale with your sister and your children.
You can reduce or eliminate your capital gain by doing a 1031 like kind exchange for your 1/2 interest in the property. This would mean that you would have to find a replacement property worth $225,000 or 1/2 the value of the property. Instead of taking cash from the sale the proceeds are used to purchase the new property. This allows you to defer the capital gain from the sale of this property so that the built in gain of the property is rolled into the new property.
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Over 14 years experience in Medicaid, Estates, Trust.
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