1041 Reporting Sale of Home and using proceeds to build new home

[Nell5922]

We sold our primary home which was in a trust and used the proceeds to build a new home within the same trust. How do I report sale and interest income on monies on home sale proceeds while new home was being built?

[Mike9241]

not enough info. what kind of trust? how did the trust obtain title to the house? 

[M-MTax]

if the trust happens to be a grantor trust, then it is disregarded for federal income tax purposes and, therefore, the transaction is treated as if you (and your spouse?) sold the house as individuals.

As a result, you may qualify for the home sale exclusion per Section 121-1.1(c)(3).

See https://www.law.cornell.edu/cfr/text/26/1.121-1