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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28939
Experience:  Taxes, Immigration, Labor Relations
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We have a house in a trust from our mother. Today it is three

Customer Question

We have a house in a trust from our mother. Today it is three years since she died. If we sell it tomorrow, do we have to pay capital gains taxes on the value greater than the tax assessed value on the date of death and the costs of renovation ?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
If there woudl be any gain on that sale - yes - that gain will be taxable.The gain is calculated as (selling price) MINUS (adjusted basis).Assuming that was a revocable living trust - that became irrevocable after your mother passed away - the house is considered as inherited - and it woudl get so-called stepped up basis equals to the fair market value at the time the decedent passed away.That basis woudl be adjusted by any improvement expenses paid after that.So - if there woudl be any gain on the sale - yes - that gain woudl be taxable.Let me know if you need any help with reporting.
Expert:  Lev replied 1 year ago.
You will report the sale transaction on form 8949 - and will calculate a gain or loss on that form
http://www.irs.gov/pub/irs-pdf/f8949.pdf
Then - results will be transferred to schedule D
http://www.irs.gov/pub/irs-access/f1041sd_accessible.pdf
and will be combined with other capital gains
and eventually will go to form 1041 - that is an income tax return for the trust
http://www.irs.gov/pub/irs-pdf/f1041.pdf
.
If proceeds are distributed to beneficiaries - the taxable gain is passed to beneficiaries as well - in this case the trust will issue schedule K1 to each beneficiary
http://www.irs.gov/pub/irs-pdf/f1041sk1.pdf
.
Let me know if you need any help with reporting.
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