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BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
Experience:  Owner of a CPA firm
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we need to sell a property in a trust to devide assets. the

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we need to sell a property in a trust to devide assets. the appraised value at my mother's death was $515. we hope to sell it for $530. do we pay capital gains? how much in California and do we have to pay the feds, too? how does "Step-Up" tax come into play? will it matter if the house sells in 2010 or 2011?
thank you so much for this forum.
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BK-CPA :

Hello

BK-CPA :

If this is a 2010 estate, the estate tax is currently in repeal with a $1.3 million step up in basis. Congress could still act. The step up will be to the fair value on the valuation date (date of death). Capital gains beyond that fair value will be taxable to the beneficiaries of the estate. This means, that in general given your question, I would expect each beneficiary to report their share of the $15 gain on their individual 1040 returns. This is of course likely better than paying capital gains on the difference between your mother's basis and the sale price, which you would inherit in the absence of the step up.

BK-CPA :

You can also increase your basis by putting money into the house for capital improvements now that you've inherited the house.

BK-CPA :

A 2010 sale will lead to tax in 2010 with a 2011 sale leading to tax attributable to the 2011 tax year.

BK-CPA :

If the estate is filing Form 1041 on a calendar year, then it will not be able to file the final return for its 2010 tax year, and will instead have to file again in 2011.

BK-CPA :

The capital gains rates for 2010 may be more appealing than in 2011.

BK-CPA :

Please let me know if there is something more that I can clarify.

BK-CPA :

Thank you for your question.

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