How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28082
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

After the death of the first spouse with an AB Q-Tip Trust

Customer Question

After the death of the first spouse with an AB Q-Tip Trust structure, can an asset with an unrealized capital loss (after step up on first death) be allocated to the By-Pass Trust and any future capital loss from sale be carried forward to offset future capital gains in the By-Pass Trust?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
ONLY inherited assets are getting stepped up basis.Thus assets allocated to the survived spouse would NOT get stepped up basis.Assets may be moved between A-trust and B-trust - but that would be treated as distribution from the trust and contribution to another trust.
Customer: replied 1 year ago.
That wasn't my question. The assets in question are in the joint revocable trust of the surviving spouse pending the final 706 Estate tax return filing. The question relates can an asset with an unrealized capital loss be transferred to the By-Pass Trust and, if sold to trigger a realized loss IN the By-Pass Trust be carried forward to offset future realized capital gains in the By-Pass Trust?
Expert:  Lev replied 1 year ago.
After one spouse passed away - there is no "joint revocable trust" anymore...
The AB trust become irrevocable - and assets MUST be divided between A-trust and B-trust.
B-trust (sometimes called the Family Trust or Bypass Trust) becomes irrevocable.
and A-trust (the Survivor’s trust) will be used by the surviving spouse.
After assets are divided between A-trust and B-trust - these assets are owned by separate taxing entities - and may not be mixed.
So the By-Pass Trust is an irrevocable trust and is a separated legal and taxing entity.
As long as trust's documents allow - additional assets may be transferred to the trust - however for tax purposes - such assets woudl be classified as gifted - and the basis for such assets woudl be the lesser of the donor's basis and FMV at the time of transfer.
That actually means - any "unrealized capital loss" will be "lost" if sold by the irrevocable trust - the gain or loss woudl be calculated using that basis - not donor's basis.
Sorry if you expected differently.

Related Tax Questions