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Stephen G. , Sr Income Tax Expert
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Until the end of 2012, Federal law species that the cost basis

Resolved Question:

Until the end of 2012, Federal law species that the cost basis for an inherited home that is resold, is based upon the market value at the time of the decedent's death ("step-up") provision.
If the home is acquired as the beneficiary of a trust (rather than inherited through a probated will), does the step-up provision apply, or is the cost basis, upon resale, based upon the original cost of the home purchased by the decedent?

thank you
Norman Solomon
Brookline, Vermont
Submitted: 5 years ago.
Category: Tax
Expert:  NYCLAWYER replied 5 years ago.

So sorry to hear of this dilemma. If my answer is not clear to you, please ask me for clarification.

It is still an inherited home although through a different instrument and the basis remains the step up basis amount as you note.
Thanks again for the question. Please click the ACCEPT button for the answer. That is the only way I get credit for it. Leaving a bonus and positive feedback after accepting are very much appreciated

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Customer: replied 5 years ago.
Relist: Incomplete answer.
Where/what is the frame of reference that stipulates that real property acquired as a trust beneficiary benefits from the step-up policy?
Expert:  Stephen G. replied 5 years ago.
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.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 5999
Experience: Extensive Experience with Tax, Financial & Estate Issues
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