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Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3151
Experience:  EA, CEBS - 35 years experience providing financial advice
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My parents died and set up a trust for their grandchildren.

Resolved Question:

My parents died and set up a trust for their grandchildren. I am the trustee of what is now an irrevocable trust which was just funded from their estate. My son is buying a house and I would like to use all of the trust to give to him to buy the house. Does he have to pay income tax on the trust distribution?
Submitted: 7 years ago.
Category: Tax
Expert:  Bill replied 7 years ago.

If the trust generated any earnings (dividends, interest, etc.) for the year which are being passed through to your son then that income would be taxable to your son. If assets are being distributed in-kind from the trust to your son then his cost basis to determine gain or loss when he sells the assets would be the cost basis within the trust. If the trust was funded with assets that were transferred in-kind from the estate then the cost basis for the assets would generally be the fair market value on your parent's date of death.

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