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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10160
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have been a H&R customer for many years. I have recently

Customer Question

my name is Kayleen ******. I have been a H&R customer for many years.JA: The Accountant will know how to help. Please tell me more, so we can help you best.Customer: I have recently had both of my parents pass away. they had a living trust .I am the executer of the trust. we sold their home last week.JA: Is there anything else the Accountant should be aware of?Customer: i am in the process of dispersing the money from the sell of the home between 6 siblings. the money was sent to the account of the living trust. do each of us have to claim this money or pay taxes on the money left in the living trust or the sell of the home?
Submitted: 3 months ago.
Category: Tax
Expert:  Lane replied 3 months ago.

Hi. My name's Lane ... I can help you in this area.

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No likely not.. and here's why.

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When an asset is received by way of inheritance (whether through a trust, a will, or other directive such as a transfer on death agreement) the asset in the hands of the new owner gets a step up in tax basis (to the fair market alue of the asset as of the date of death)

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The transaction that did happen here was a sale, and sales of capital assets crreate either a gain or a loss.

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Here's the formula: Capital gain = sales price - tax basis

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And again, the tax basis here is the fair market value as of date of death. So what IRS sees over and over in this scenario (where the property was sold within a year or so, before prices have had time to rise) is no capital gain (hence no capital gains tax - an income tax) at all.

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Many times, becasue of the sales commissions, there can even be a small tax loss.

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If the title transferred to the children before the home was sold, then your each report your portion of the sale price ... minus your proportion of the basis ... to show no gain.

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There will be a 1099-S coming from the title company or escros agent or attorney that diid the closing. You might want to ask whether the sale was being treated as a sale by the beneficiaries or by the trust.

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Either way, there wll be that step up in basis, which likely eliminates and capital gains tax.

Expert:  Lane replied 3 months ago.

(sorry for the typos. The system's not letting me edit for some reason)

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. … Please let me know if you have any questions at all, before rating me

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

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Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

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