turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

Complicated Trust tax question regarding real property sale

There was some confusion in my first post, so I am reposting this with clearer details. This home was sold in Dec 2023 and I am trying to figure out how to calculate the gain or loss to report the sale to the IRS and/or CA. I have no idea what to do, please help!

 

- The home is located in CA. It was owned by Lucy's Living Revocable Trust, which listed her and her son as co-trustees.

- Lucy passed away in June 2014 and the deed remained in the name of Lucy's Trust, which of course became irrevocable at this time due to her death. Zillow estimates FMV at this time as $325,000.

- Lucy's Trust granted special permission to her son to access the trust's money and live in the trust's house until he passed away (which he did in Oct 2023), at which point all assets were to be liquidated and given to Lucy's Trust's beneficiaries.

- We received a (sight unseen) free CMA report three weeks after the son's death and a month before it was sold in 2023, with a value of ~$365,000, based on neighborhood price per sqft.

- We received another email (sight seen through photos) from a realtor who said the comparative market rate would be about ~$369,000 (again based on sqft) but that its value to an investor would likely be $250,000,. His "friend" made an offer of $230k and provided a list of repairs and remodeling he would do, while another investor offered $320k and we accepted their offer. Would the FMV be $250k investor estimate? $320k sales price? $365k or $369k comparitive price? Or do I use the "step-up basis" from 2014 that I found on Zillow for $325k? As you can see, there's a huge gap between the highest and lowest numbers; one would be a capital gain of $70k, one would be a capital loss of $49k.

- No appraisal was paid for and now it is too late to get one because it is already being remodeled.

- House was sold in Dec 2023 for $320,000 due to extensive necessary repairs. 1099-S lists Lucy's Trust and EIN.

 

- Not sure if I'm to use the step-up basis from 2014, the CMA from 2023, an investor's estimate, or the actual sales price ("what it would sell for on the market").

- Not sure HOW or WHAT to report to IRS, I just know the sale will be reported under Lucy's Trust.

- (Reporting a gain or loss doesn't affect me in any way since I will be receiving no share of the trust funds. If I could say "it was worth 320k and sold for 320k" and claim nothing, that would make my life easier, but I'm guessing that's not possible.)

- Trust lawyer tells me to consult CPA. CPA tells me to consult trust lawyer. I'm going in circles. Local CPAs charge $1500 for assistance. If you can recommend a more affordable Trust CPA who can help me file in CA, please do!! 🙏

 

Any knowledge you could share would be extremely helpful. Thank you so much for your time!

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Reply

Complicated Trust tax question regarding real property sale

You posted the same (very lengthy and involved) question previously and a Champ suggested consulting with legal counsel or a local tax professional (legal counsel would be better at this point).

 

Regardless, you have an unusual scenario where an individual is "granted special permission" to access and use trust assets? Is that the case? If so, that individual was a beneficiary as well as a co-trustee. 

 

From the facts you stated the son was granted a life estate by the terms of the trust and, generally, the basis would be predicated upon the last to die of the life tenants. However, in this instance the preceding estate was held in fee simple and then placed in trust by one grantor (Lucy). As a result, it is likely that the basis would be the fair market value on the date of her death. 

 

You REALLY DO need to consult with a local tax professional and/or legal counsel for this scenario as no one here has access to the exact terms of the trust.

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies