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trust house sale

Jim t1 — Mon, 29 Mar 2021 19:36:05 GMT

My dad bought a house in 1970 for $17,800 and put it in an Irrevocable trust and sold it last year for $280,000. Who pays taxes on the capital gains and is there a way to pay the lower capital gains tax rate?

Re: trust house sale

Anonymous_ — Mon, 29 Mar 2021 19:53:12 GMT

What are the exact terms of the trust with respect to the house and who are the parties (grantor(s), trustee(s). beneficiary(ies)? Has the trust been filing a 1041 each year since its inception? Is your father living?

Re: trust house sale

Jim t1 — Mon, 29 Mar 2021 20:42:18 GMT

What are the exact terms of the trust with respect to the house and who are the parties (grantor(s),

My parents set up the account, but my mom has since passed away. All the property went into a LLC in the beginning but firm that set up the trust said to move the property from the LLC to the trust prior to selling, which was done.

trustee(s) & beneficiary(ies)?

My sister and I are both trusties and beneficiaries.

Has the trust been filing a 1041 each year since its inception?

Yes.

Is your father living?

Yes.

Re: trust house sale

Anonymous_ — Mon, 29 Mar 2021 21:37:05 GMT

@Jim t1 wrote:
My sister and I are both trusties and beneficiaries.

But you and your sister are not the grantors, your father and mother are the grantors (at least that is the way in which it appears from your answers).

In that event, the house would not qualify for the home sale exclusion under Section 121 and the trust (or beneficiaries if the gain is passed through and distributed) would be responsible for any taxes due on the capital gain.

Note that the assumption here is that the house was used for personal purposes, not rental use. If the latter, then there would be recapture of depreciation involved.