Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.
Your question was referred to me to answer.
In order to answer your question, we need to know what type of trust you are talking about.
Briefly, if you inherited the real property through a living trust (grantor trust) of the decedent (ie. a trust that the decedent controlled or had the right to control or revoke at the date of death), then the step-up in basis applies, just at the previous answer stated.
Basically, a revocable trust is disregarded for estate tax
purposes (ie. it is included in the gross estate); it applies only for estate settlement purposes, bypassing the Probate process, and following the terms of the Trust in terms of disposition of the asset.
If however, the title to the real property was included in an irrevocable trust (such as an irrevocable trust designed to protect the asset for Medicaid qualification purposes), and you obtained title from that type of trust, then the cost basis for tax
purposes for the trust or for you would be the original purchase price of the real property plus any improvements by the trust or you through the sale date of the property.
If this doesn't fully answer your question, then please describe the nature & terms of the trust more fully, and we'll go from there.
Please remember to "ACCEPT", it is the only way we get credit for our work. Feedback, if you have time, and bonuses, where you think are appropriate based upon the quality of my answers, are always most appreciated. Thanks again for using our service.
I'll be happy to answer any follow-up questions you may have.