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I live in Georgia and my sister lives in California. We have just inherited 50% each of our parent's house located in San Diego, CA. It was placed into a trust in the early 90s. Our mother passed in 1997 and our father passed in December 2012. We plan to sell the house and are worried about Long Term Capital Gains - specifically, what values are used to determine the amount of the gain to be taxed. Is it the value of the house as of her death in 1997 or our father's death in 2012? I've heard that, due to the trust, it is based on the date of our mother's death. I can't believe this is right as it would seem to greatly increase the basis for determining our capital gains. We're both dirt poor and are trying hard to do this without a lawyer. Also, as a resident of Georgia, am I liable for any state taxes (California or Georgia)? Help! I should also add that our father made his second wife the trustee of his estate and that we are not on good terms at all. She has elected not to file an estate tax return for the trust after my father passed and we do not believe one was filed when my mother passed in 1997. She is represented by an attorney and we cannot afford one. The house is being distributed from the trust to my sister and I at the end of August.
Thank you for your reply. I do have some followup questions and a few additional facts that may help you.
We do plan to sell the house immediately and neither my sister or I will be taking up residence there at all.
The house was placed into the family trust via quitclaim deed in 1998.
You stated: "In almost all cases, a personal residence that is held in a trust still gets the increase to the value at the date of death. So, the gain will most likely only be any change in value between the date of death and the date of sale."
This sounds correct, but I am being told that the value of the house (for the purposes of determining the amount of gain) is computed from the date of our mother's death in 1997 and not my father's day in 2012. This sounds wrong and, if true, I believe would greatly increase the gain and therefore our tax liability. Is there anything in the tax code or that is common in trust law you are aware of that would trigger a calculation of the taxable gain from any point other than the date of my father's death in 2012?