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Irrevocable trust - final return - trust sold a house and…

irrevocable trust - final return...
irrevocable trust - final return - trust sold a house and sold brokerage account - proceeds were distributed to 3 beneficiaries - this there was a gain on the house - in what box on the k1 would the gain be reported for sale of house - and what box would the gain - if any for the brokerage account go?
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3/19/2018
levr
levr, Tax Advisor
Category: Capital Gains and Losses
Satisfied Customers: 32,697
Experience: Working for a large tax preparation service
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On form K1 (1041) that amount will be reported in box 4a Net long-term capital gain.

- assuming both were held more than a year.

For assets held in brokerage account - we need to verify if the gain is reported as long term on form 1099B.

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Customer reply replied 1 month ago
if it is short term will it be in another box on the k1

Yes - Net short-term capital gains are reported in box 3.

These calculations are done on form 8949.

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Customer reply replied 1 month ago
the property is in CA - beneficiary spoke with a CPA in CA - stating that if you sell house within nine months of the death of a parent the fair market value and the sales price are essentially the same - that's fair market - that would not be able to be used as cost basis? essentially that is what it sounds like they are saying - you have any insight on this?

beneficiary spoke with a CPA in CA - stating that if you sell house within nine months of the death of a parent the fair market value and the sales price are essentially the same - that's fair market - that would not be able to be used as cost basis?

If the property was included into the estate of the deceased - we may use stepped up basis.

If the property was NOT included into the estate of the deceased - stepped basis may not be used.

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Customer reply replied 1 month ago
estate is all assets held by person at death - would his estate not be given to the trust?
Customer reply replied 1 month ago
in what case would you not include all assets into an estate?
Customer reply replied 1 month ago
this property was managed by the estate and then sold - why would it not be included in the estate?
Customer reply replied 1 month ago
is step up basis for inheritance? - since this is irrevocable trust and not an inheritance would the step up apply?
Customer reply replied 1 month ago
also lets hope we can use step up basis - it step up or fair market is 500k and they sold it for 530K - but there was still debt on the house of 130k - that is why they only received 300k proceed check - in this case would the sale price of 530 be deducted by 130k? would they get a loss?

estate is all assets held by person at death - would his estate not be given to the trust?

Yes - that is correct.

assets the deceased transferred into an irrevocable trust prior to the death are NOT included into his estate.

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Customer reply replied 1 month ago
since the estate has been managing - renting the property while he was still living - when he passed - this was not be in his estate - because he technically did not own it? the estate does?
Customer reply replied 1 month ago
you are saying this property was not be eligible for step up basis? sounds unfair
Customer reply replied 1 month ago
is there an irs tax code somewhere that states this? they are not going to be happy to hear this

when he passed - this was not be in his estate - because he technically did not own it? the estate does?

Yes - if the property was titled to the irrevocable trust - it is not included into deceased estate.

That was the purpose to transfer the proper to the trust to exclude that asset from his estate.

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is there an irs tax code somewhere that states this?

Under IRC section 1014(b)(9) - any property that is required to be included in the value of a decedent's gross estate for estate tax purposes shall receive a stepped-up
http://www.law.cornell.edu/uscode/text/26/1014
9) In the case of decedents dying after December 31, 1953, property acquired from the decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of the decedent’s gross estate under chapter 11 of subtitle B or under the Internal Revenue Code of 1939. In such case, if the property is acquired before the death of the decedent, the basis shall be the amount determined under subsection (a) reduced by the amount allowed to the taxpayer as deductions in computing taxable income under this subtitle or prior income tax laws for exhaustion, wear and tear, obsolescence, amortization, and depletion on such property before the death of the decedent. Such basis shall be applicable to the property commencing on the death of the decedent.

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Customer reply replied 1 month ago
to exclude it from probate -right?

to exclude it from probate -right?

To avoid probate - we may have a revocable trust - that would be good enough and no need to have ab irrevocable trust.

The irrevocable trust is usually used to exclude assets for Medicaid purposes.

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Customer reply replied 1 month ago
bot***** *****ne - in this case - since the property is not included in deceased estate - the step up basis is not an option - therefore - the cost basis would be the original purchase + repairs and such - can not use step basis -
Customer reply replied 1 month ago
in this case the irrevocable trust good for trustor - not so much for the beneficiary

Yes - that is correct.

I may guess regarding actual reasons the irrevocable trust was selected

- but that makes no difference now - the conclusion is correct - no stepped up basis.

levr
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