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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Our mother passed away last year. My brother and I just sold

Resolved Question:

Our mother passed away last year. My brother and I just sold the house this week. The house had been in a trust for at least 15 or 20 years. My question is this, will there be any capital gains tax involved. This is a first time sale of any property for me as for my brother i don't know.
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.
Hello 777,

Can you please tell me what type of trust this property was in before your mother passed away?

Customer: replied 4 years ago.
hi merlo all I know is that it was a family trust with everything in my name and my brothers name
Expert:  Merlo replied 4 years ago.
Hello again 777,

Were you the beneficaries of the trust or were you actually the owners of the trust?

Customer: replied 4 years ago.
hi merlo i think it was an irrovakable trust with life tendency for our mother. hope that helps.
Expert:  Merlo replied 4 years ago.
Hello again 777,

Thank you for the clarification.

Basically you received this property as an inheritance from your mother. What that means is that you automatically get a stepped up basis in the property. Your new basis in the property is whatever the fair market value was on the day your mother passed away.

When you then sell the home, you would be liable for tax on any gain you had from the sale. Your gain is calculated by taking the selling price less your basis.

With home market values being depressed right now, it is very possible that the market value of this home was actually higher last year when your mother passed away, in which case you may have no gain at all. However, if you do have a gain, it is taxed as a long term capital gain and taxed at a maximum rate of 15%.

The sale of this property would be reported on Schedule D in Part II for long term capital gains/losses.

If you actually end up with a loss on the sale of the property, you may not claim a deduction for the loss on any personal property. However, if this house has been vacant since your mother passed away, and was not used by your family as a personal residence, then it would qualify to be treated as investment property. In that case, if you have a loss on the sale, you may claim a deduction for that loss on your tax return, not to exceed a maximum loss of $3,000 in any one year. If your capital loss exceeds $3,000, any remaining loss can be carried forward and used on future years tax returns, claiming a maximum capital loss each year of $3,000 until the entire loss has been claimed.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you 777.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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