Living Trust ?

[Catieb20]

My father just passed away in July 2024.  I am his personal rep(trustee) for everything.  In 2022 my dad set up a revocable living trust and put his house in it.  My family had owned the house since 1986.  Once he passed away in July 2024 my sisters and I decided to sell it in November 2024.  The house was worth $400,000 at that time and we sold it for the same price.  With the mortgage getting paid off, money to realtors and lawyers my sisters and I were left a little under $150,000 to split three ways.  I was told there was no capital gain or loss so I wouldn’t need to do taxes but to double check.  I set up a living trust bank account in my dad’s name at the end of November and I gave my sisters their payments in December/January.  I’m going to close the living trust bank account because it’s not being used for anything.  Do I need to file taxes for the living trust or am I all set?  I did receive a mortgage statement for my dad in his name when I do his individual taxes but I just want to make sure I’m not going to get in any trouble if I don’t do the living trust taxes.  I didn’t file anything with the IRS for the living trust so I don’t know if I need to or not.    

[DianeW777]

It depends. If the trust had no income then it is not required to be filed and this assumes the beneficiaries (you and your sisters) actually sold your father's house. You may want to file Form 1041 as final, if you haven't done that.

If you did not get a 1099-S, then you really wouldn't need to file the sale. As  you indicated, the sales price and the value on the date of death are the same. The only difference could be a loss due to sales expenses. If none of  you lived in it as your home, then each of you could have a reportable loss that would reduce your other income and thereby reduce your overall tax liability. You do have the option of reporting the sale of inherited property.

In TurboTax you can follow these steps to enter the sale (click the link for more information):

1. Open or continue your return.
2. Navigate to the investment sales section:
   • TurboTax Online/Mobile: Go to investment sales.
   • TurboTax Desktop: Search for investment sales and then select the Jump to link.
3. Answer Yes to the question Did you have investment income in 2024?
   • If you land on the Your investments and savings screen, select Add investments.
4. Select 'I inherited it' for the acquired date and TurboTax will handle the proper treatment of the loss.

We are very sorry for your loss.