I am in a complicated situation (for me), suddenly becoming successor trustee of three trusts in California and having to file both federal and state personal taxes for the recently deceased (will be using TurboTax for this) as well as all three trusts (TurboTax Business?). I understand all the trusts are now irrevocable, but they were all revocable living trusts originally. I am attempting to do all the taxes myself but it is overwhelming. I have two primary questions that I need assistance with, please, one for a trust and one for the final personal taxes I'll need to file for the individual.
To summarize the details:
- initial homeowner (trustee/trust) passed away in June 2014 and the deed remained in the trust's name until it was sold in December 2023. (I am trying to figure out how to calculate historical value for this date for step-up basis, in case it is needed.)
- this trust granted a Life Estate or Living Estate to the son (co-trustee), who could access money and live in the house for the remainder of his life - and he passed away in 2023 - at which point all assets were to be liquidated and given to charity beneficiaries.
- we received a (sight unseen) CMA three weeks after the son's death in 2023, with a value of ~$365,000.
- house was actually sold for $320,000 due to extensive necessary repairs.
- the son also withdrew several thousand dollars from the trust's bank account over the 2023 tax year.
My questions:
- I understand I will have to report the house sale as a gain or loss. How do I calculate the gain or loss? Do I use the step-up basis from the trust owner / home owner's death in 2014, or the CMA from when the son passed away and the house was sold?
- Do I need to report the son's withdrawals from the parent's trust bank account on his taxes as a form of income? Or are these considered a tax-free inheritance?
Thank you so much for your time!
