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I have a very complex (at least it is to me) tax question. I am the trustee of my parents trust. I have 3 siblings and 2 pieces of real property that must be sold and distributed. My father passed over 25 years ago and my mother passed 8 years ago. myself and my sister took care of my mother for last 8 years of her life. my sister and her husband moved in to our mothers home to take care of her at night and I was there during the day. My mother passed 8 years ago and my sister continues to live in the home rent free.  we finally all have agreed to sell the properties. my sister that lives in my mothers home for the last 15+ years wants to purchase the home. the fair market value of the property is $215,000. the rest of the siblings have agreed to sell her the home for $145,000 basically gifting her $70,000 in equity. this property also has a equity loan of $45,000 which will have to be paid out of the trust. The other property which is right next door which is occupied by my brother who has been paying rent of $700.00 for the last 6 years wants to purchase that home. We all have agreed to sell my brother that home for $110,000 dollars and the home has been appraised at $140,000.

 

My mothers income when she was alive was $1200.00 per month which came from social security. the question at hand since my mother has passed we have never filed a tax return for the properties as the only income from the property was the rent of $700.00 my brother was paying to live there. The income from the property paid the equity loan payment with about $200.00 left over each month. the $200.00 that was left over was saved for repairs and upkeep of both homes. Does anyone know if the trust will be liable for any taxes on the properties or is there any penalties because we did not file taxes on the income for the properties? I am very nervous about distributing the cash assets from the sale of the 2 properties and then being stuck with a huge tax bill as the trustee? is there anyone out there that knows the laws concerning this type of situation. in case it matters I do live in California.

 

besides answering here in this forum whomever can answer this question can you copy the answer and any subsequent questions you might have to be able to determine our tax liabilities to my personal email which is [email address removed]

 

Thank you for any help or advice that you may give. This is killing me as I can find no tax professional where I live that can answer these questions.