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Barrister
Barrister, Attorney
Category: Estate Law
Satisfied Customers: 23381
Experience:  14 yrs estate law, real estate. Wills/Trusts/Probate
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my sister & i are selling our parents house who are no longer

Resolved Question:

my sister & i are selling our parents house who are no longer with us the house is in a irrevocable trust the tax value at the time of their death was 330000 we have sold the house for 405000 do you think we are obligated to pay capital gains taxes or does the 250000 exemption come into play
Submitted: 11 months ago.
Category: Estate Law
Expert:  Barrister replied 11 months ago.
Hello and welcome! My name is XXXXX XXXXX I will try my level best to help with your situation or get you to someone who can.
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The taxable value of the property is not the value that is attributed to the property for purposes of capital gains taxes if the beneficiaries received the property at the death of the grantors (makers) of the trust.
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If the trust is structured as a grantor-type trust, meaning that parents received the income from any trust assets during their lifetimes, all appreciated assets transferred into the trust, such as real estate or a stock portfolio, can still receive a step-up in basis upon the death of the grantor.
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According to a recent IRS ruling (PLR-105239-12), Section 1014(a)(1) of the tax code provides that the basis of property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent shall, if not sold, exchanged, or otherwise disposed of before the decedent's death by such person, be the fair market value of the property at the date of the decedent's death.
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In an identical question the IRS responded:
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"In this case, Taxpayer’s issue will acquire, by bequest, devise, or inheritance,
assets from Trust at Taxpayer’s death. The assets acquired from Trust are within the
description of property acquired from a decedent under § 1014(b)(1). Therefore, Trust
will receive a step-up in basis in Trust assets under § 1014(a) determined by the fair
market value of the property on the date of Taxpayer’s death.
.
Accordingly, based solely upon the information submitted and the representations made, we conclude that following the death of Taxpayer, the basis of the property held in Trust will be the fair market value of the property at the date of Taxpayer’s death under § 1014(a)."
.
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So according to the IRS, the property would receive a stepped up basis equal to the fair market value of the property at the time you both inherited it from the trust. So as long as the property has not appreciated in that time, you wouldn't owe any capital gains taxes on the sale. If the sale is within 6 months of the time you received it, it is unlikely that it would have appreciated so that you would owe anything.
.
.
Thanks
Barrister
Barrister, Attorney
Category: Estate Law
Satisfied Customers: 23381
Experience: 14 yrs estate law, real estate. Wills/Trusts/Probate
Barrister and 5 other Estate Law Specialists are ready to help you

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