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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29796
Experience:  Taxes, Immigration, Labor Relations
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I recently sold a home owned by a revocable living family

Customer Question

I recently sold a home owned by a revocable living family trust for which I was both grantor (along with my late wife) and trustee. Beneficiaries were equal (1/3) shares to me and my late wife's two sons. The trust had no income. What are the tax consequences, particularly with respect to the Basis used by each of us in computing Capital Gains Tax?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

The issue with your revocable living family trust is that the trust MUST be divided into two parts and all assets held in the trust must be divided as well.
The part A will still be treated as grantor trusts and ignored for tax purposes - so all income will be reported on YOUR tax return.
The part B will be treated as irrevocable trust - and it is a separate taxing entity.

The basis of assets held in Part A is your basis

and the basis of assets held in Part B is stepped up basis equals to fair market value at the time your spouse passed away.

Expert:  Lev replied 1 year ago.

Actually to determine the basis of the house - we need to know how it was allocated between part A and part B. If it was divided equally between these parts - so you will determine the basis separately for each half.
Another issue to consider - if you are living in a community property state. If yes - the full house gets stepped up basis.
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