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robertmeyer310
Returning Member

Ensuring beneficiaries receive stepped up cost basis for sale of parents home.

Ensuring beneficiaries receive stepped up cost basis for sale of parents home.

 

Parent passed away leaving home to five children (California). House is in a trust.  Want to ensure proper tax return completed and that stepped up cost basis is incorporated so that no capital gain taxes on house.  Is the sale of house incorporated into an estate tax return?  And then money just distributed to five beneficiaries?  Or is sale of house somehow incorporated into each of the five children’s tax returns?    Thanks 

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Accepted Solutions
tagteam
Level 15

Ensuring beneficiaries receive stepped up cost basis for sale of parents home.


@robertmeyer310 wrote:

Is the sale of house incorporated into an estate tax return?  And then money just distributed to five beneficiaries? 


Yes, if the estate sold the property and received the proceeds, then the transaction will be reported on the estate's income tax return (Form 1041). 

 

The estate, as the current owner of the property, will receive a stepped up basis to its fair market value as of the date of death of the decedent per Section 1014 of the Code. The result should be the recognition of neither gain nor loss assuming the sale transpires reasonably close (in terms of a time period) to the death of the decedent. 

 

The proceeds can be distributed to the beneficiaries and, if there is no gain on the sale, they would have no income tax liability flowing through from the estate to their K-1s on this particular transaction.

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1 Reply
tagteam
Level 15

Ensuring beneficiaries receive stepped up cost basis for sale of parents home.


@robertmeyer310 wrote:

Is the sale of house incorporated into an estate tax return?  And then money just distributed to five beneficiaries? 


Yes, if the estate sold the property and received the proceeds, then the transaction will be reported on the estate's income tax return (Form 1041). 

 

The estate, as the current owner of the property, will receive a stepped up basis to its fair market value as of the date of death of the decedent per Section 1014 of the Code. The result should be the recognition of neither gain nor loss assuming the sale transpires reasonably close (in terms of a time period) to the death of the decedent. 

 

The proceeds can be distributed to the beneficiaries and, if there is no gain on the sale, they would have no income tax liability flowing through from the estate to their K-1s on this particular transaction.

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