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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4063
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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H & W bought residence after second marriage (his kids, her

Resolved Question:

H & W bought residence after second marriage (his kids, her kids but no our kids). H dies in 1985 and leaves his 1/2 of residence to W, in Trust, "... to be held, administered and distributed as follows: as long as W desires to reside at x, she shall be allowed to resided at said residence, without payment of rent. Upon my wife's death, or such earlier time that she ceases using the real property as her personal residence or sells the real property, my one-half interest in the real property or my one-half interest in the sale proceeds shall be distributed to my issue..." W dies in 2013, still living in the residence.
Q: What is basis in the property for the sale in 2013? What does Successor Trustee report?
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Lane :

Was the trust irrevocable? ... (did the trust pay it's pwn taxes (1041) or did the grantor pay taxes (grantor trust)

Lane :

related: What the wife using this under HEMS (Health education maintenance and support) so as to keep corpus out of estate? (not directly relate but will tell whether or not the trust was a separate entity)

Lane :

sorry for the typo "Was" the wife ...

Customer:

Trust was Testamentary, and the only asset was the residence; all other assets were distributed from Probate. Must have been irrevocable because H was dead.

Lane :

The then trust go the step up on the 1st half

Customer:

W never filed any known type of tax document for the Trust

Lane :

Would not necessarily be irrevocable

Lane :

If it was a revocable trust (grantor trust) the the W got step up and then heirs get step up from there

Customer:

Was not created until H died; he can not revoke after death.

Lane :

Doesn't matter

Lane :

Ok testamentary

Lane :

then the trust got the step up and the beneficiaries of the trust have a carryover basis (a deferred gift)

Lane :

Yes if the trust continues, then yes, irrevocab;e .. more than just a will replacement

Customer:

Basis is clearly stepped up in 1985. Is there any later step up in basis?

Lane :

No

Lane :

That's the point

Lane :

If it had been a revocable trust... simply a will replacement where the property vested in someone (rather than the trust), there there would have been that secons step up

Lane :

but with an IRREVOCable trust the beneficiaries are gett ing a deferred gift ... their basis is the 1985 basis

Customer:

The benes would like he answer, but I agree. Just needed a confirmation.

Lane :

Yes, a surprise for many ... time to pay for the other things accomplished

Customer:

The benes wanted a step up on the second death, but that would have required the property to go to W, which is what H wanted to avoid, apparently. Thanks.

Lane :

you have it

Lane :

yes, either protecting for children or for get out of estate for 706 purposes, or both

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4063
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 11 months ago.

Thanks for the rating.

Sorry it took is a minute to get there

Lane
Customer: replied 11 months ago.

First time I have used the service. I'll keep it available.

Expert:  Lane replied 11 months ago.
Excellent ... It certainly fills a need ... A gap.

Lane

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