trust distribution of principal

Forum|Forum|20 days ago
September 16, 2026
4 replies
21 views

My parents have both passes away. The family is distributing assets. If land is distributed, is that considered principal and not subject to income taxes?

NCperson

Level 15

your title makes the answer a little unclear.

certainly, the distribution of land from either an estate or a trust is not a taxable event as no sale occured.

However, if you later sell the land, whether it was in a trust or an estate can make a difference.

if distributed from an estate, the cost basis is likely the value of the land when the last parent passed. If the land was in a trust, it really depends on what kind of trust to determine the cost basis.

ThismeAuthor

Level 2

The land is in an irrevocable trust and has a small amount of income. I thought that the IRS considered everything as income until it exceeds the amount of income the trust received.

M-MTax

Level 15

Is the land leased? If so, the lease payments would be considered income and taxable.

If the trust has income from other sources (investments, et al), then that income would be taxable with the exception of tax-exempt interest or dividends.

NCperson

Level 15

the land is an asset and is distributed as such. Since there is no sale, there is no income. However, and check with the attorney handling this, the cost basis is whatever the cost basis was when the land was added to the irrevoable trust; as it is irrevocable, it does not get the benefit of ‘step up’ in basis. That is important should you decide to sell the land in the future.

« the IRS considered everything as income until it exceeds the amount of income the trust received. >

unless you can document this statement from a reputable source and post that source, the statement isn’t steeped in fact.