Convoluted, but heh there has to be smarter people than me who can answer this.
House in a trust after death of grantor. Grantor passed 12/1/22. House was idle. House was rented May 2023, income received, expenses recorded, profit made. August 2024 House was distributed to a beneficiary's LLC. Rent continued at a profit. In December 2024 the business property was sold at a material loss i.e. December net proceeds were materially less than adjusted basis inherited from Trust.
Question 1
For the period of August thru December (beneficiary LLC tax return) rental income is recorded on Sch E, yes?
Question 2
Given that the rental business property was sold at a loss would this loss be picked up on 4797 AND considered ordinary Loss (which could be carried forward assuming it is greater than AGI), yes?
Question 3
Would the basis be on the date of the death of the grantor or when the beneficiary LLC assumed ownership?
Question 4
Would the basis be Adjusted Cost basis or FMV (stepped up basis)?
That's it. I would appreciate a stab at this. I have limited understanding, but will find the answer eventually. thanks.
@mjlresources wrote:For the period of August thru December (beneficiary LLC tax return) rental income is recorded on Sch E, yes?
Yes, assuming the LLC was a single-member LLC in which case it is disregarded for federal income tax purposes.
@mjlresources wrote:Given that the rental business property was sold at a loss would this loss be picked up on 4797 AND considered ordinary Loss (which could be carried forward assuming it is greater than AGI), yes?
Yes. If indeed there was a net loss on the sale, the loss would be entered on Form 4797 and could generate an NOL.
@mjlresources wrote:Would the basis be on the date of the death of the grantor or when the beneficiary LLC assumed ownership?
The beneficiary (LLC) would take the trust's adjusted basis. The trust's initial basis would be the FMV on the date of death of the grantor.
@mjlresources wrote:Would the basis be Adjusted Cost basis or FMV (stepped up basis)?
The trust's initial basis would be the FMV on the date of death of the grantor. The beneficiary (LLC) would take the trust's adjusted basis on the date of the distribution.