I am using TT to do my brother's irrevocable Trust (formed at my parents' death) and his personal tax return. From what I can tell, an heir can get the $250/$500k exclusion for a primary residence if they lived in the house for two of the last five years. The Trust owns and will sell the house in 2024. My brother (an adult) is the trust beneficiary and has lived in the house for the required years. House has appreciated since parents' death so there will be a gain on sale (above stepped-up inheritance basis). Will the trust be issued a 1099-S or my brother? Does the trust report the gain on home sale on the K-1 and my brother then report on his individual tax return with the exemption? If the trust has been distributing capital gains, does it need to distribute the capital gains on the sale of the house to my brother? If so, how does that work in TT? I don't see anything on the K-1 other than a regular capital gains tax. Or do I have the taxes completely wrong on this, and somehow my brother does not get the primary residence exception even though he has lived there for 20+ years since it is owned by his irrevocable trust (I hope not)?
