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Category: Tax
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This is related to last years question. My sister and I owned

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This is related to last year's question. My sister and I owned my parent's house as part of an irrevocable Trust. We have now recently sold the house. It was sold at a price that was less than the assessed value. The lawyer that was trustee of my parent will handled the sale and has distributed the net proceeds to the four children in equal amounts. I have 2 questions.

1. Since the house was sold for less than assessed value, I believe that there is no capital gains involved in the sale but that my sister and I will have to acknowledge the sale in our 2010 income tax return. How is that best done?

2. Is the distribution of the proceeds from the house sale, considered inheritance? I don't believe that it is and the only tax liability on that money would be the interest earned if put in a savings account. Is that correct?
Submitted: 5 years ago.
Category: Tax
Expert:  CGCPA replied 5 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.


The house sales price less certain costs are the basis for any gain or loss calculation not the assessed value. The costs to be added up are: the amount recorded as "cost" within the trust, the expenses of selling the house, and any expenses incurred to render the house saleable.If the property was rented out for any time while it was in the trust you will need to deduct any depreciation that may have been claimed from the basis of the property.This number, along with the sales price, is then divided by the number of individuals who received the net proceeds of the sale. Since the house was inside a trust this gets reported as a capital gain in the Schedule K-1 from the trust to each individual.


This is not considered an inheritance since the house was in the trust at the time of sale. That is why the reporting is different. Since the house was also not the main residence of any of the beneficiaries of the trust, you will also not be entitles to the exclusion from the gain of your principal residence and all the gain, offset by any capital losses you may have, will be taxable.


If there are other factors you need to question or other facts that were not brought up in your initial question, please provide this.

Customer: replied 5 years ago.
These answers are totally unhelpful and confusing. I have 2 sisters and brother. one sister and myself where the only two in the trust. The house we sold had been in the family for 70 years and we have no basis to subtract cost from other than the selling price.
If we are not use assessed value as a start what should we use?

The distribution to my brother and sister who are not in the trust shouldn't be treated as gain since they were not the owners. They want to know if its an inheritance.
Expert:  CGCPA replied 5 years ago.

The IRS rules specifically state that basis is what is to be used in this calculation, not assessed value. Assessed value is only used for real estate taxation purposes. Sadly the cost is that from 70 years ago which will make almost everything taxable as a long term capital gain.


The funds from the sale will only be taxable to the two of you who were included in the trust. The remaining siblings who were not included in the trust can treat their share as an inheritance but the two of you who were in the trust will need to absorb all the taxes on the gain unless the other two chip in towards that.


If this is not a satisfactory answer to your mind I will opt out so another person here can tell you the same thing.

Category: Tax
Satisfied Customers: 3820
Experience: over 40 years experience in tax matters
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