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1 Absolutely. Yes you are correct. That's the whole purpose of the Revocable trust.
2. Since I take it that the real property was in the revocable trust, you might want to transfer it to your wife at the time you sell it & then to the buyer. Your wife's tax basis will be the same as the trust's basis. You should consider getting an "opinion of value" from a real estate broker & make sure it is at the highest & best use, as if it is close or at the selling price, you'll actually have a deductible loss (for any selling expenses, commissions, etc.) as the property will be considered as "held for investment" as it was acquired (inherited) through the trust reason of death of the grantor.
3. Not formal appraisal in the circumstances.
One final thing, you probably need to check with your lawyer or your State Department of Revenue (or whatever they call themselves) to make sure you don't have to obtain a release or file an affidavit stating that there was no Ok estate or inheritance tax due on your mother-in-law's estate as often there is an automatic lien on real property interests when someone dies, even though the property is in a trust.
Many states including mine, have this in place.
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Yes that's the reason. That loss will be a long-term capital loss (no matter how long you keep the property - that's just the way it works in this circumstance).
I'd do it (transfer it to your wife) now if you could do it without paying a lot of $ on transfer (deed) stamps. The sooner you get rid of the trust (you can't use it for anything, put anything in it, etc.), the better off you'll be, plus you can then make sure the title is clear before you actually go to a closing.