How do I determine cost basis of inherited land that was in fathers trust (who died in 2002), but I didnt inherit until mother died in 2016?

[dnleigh]

To calculate capital gains, would the FMV be the time of fathers death in 2002 or mothers death in 2016?  Mom died in 2016 and had a trust (I know I get the stepped up value of her stocks as her DOD). But, father passed away in 2002 and had an irrevocable trust that we also inherited when mother died.  We sold land in his trust and I am trying to figure out our capital gains.

[TomYoung]

It's a little hard to know what's going on here.  If your folks had a "living trust" (a grantor or revocable trust) and at you father's death in 2002 the living trust split into two parts with your father's trust becoming irrevocable and holding the land, then the 2002 FMV would be your basis when your mother died and you ended up as beneficiary of both trusts.

[dnleigh]

I think they had A and B trusts, due to the lower estate tax limits at the time.  Father's trust was not incorporated into mother's estate at the time of his death...does that make sense?

[TomYoung]

Yes.  In an A/B situation the revocable trust splits into two parts, one irrevocable (father's) and one revocable (mother's).

[dnleigh]

Thanks.  The capital gains situation that puts us in is extremely unfortunate and defeats the purpose the trusts were established in the first place.  The trusts probably should have been eliminated when the tax laws changed....is that even possible to do?

[TomYoung]

The trust could have been amended or completely re-written with the change of the tax law, yes.  But they weren't so you live with it.