Our mother recently passed, and we are in the process of selling the house. The house is in a trust which my parents set up before our father passed. After the sale of the home and the distribution of funds to the four brothers, how are taxes calculated and is it the trust account which will need to file for the taxes next year or the individual heirs?
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Hi Yokaye1!
I'm sorry to hear of your mother's passing. Generally, only income that was generated after your mother's passing will be taxable to the siblings. For example, if there were any interest or dividends generated, they would be divided between the four brothers and taxed on your personal returns, but the original dollar amounts your mother already held would not be taxed. The home will only be taxable if you sold it for more than it was worth at the time she passed. If you sell relatively soon, there will most likely not be very much gain to tax, if any at all.
In terms of filing returns, a return will need to be filed for the trust and then a separate K-1 will be distributed to each brother that indicates that amounts that each of you will need to include on your personal return.
Here is an article that may be helpful as well - https://turbotax.intuit.com/tax-tips/estates/estates-and-trusts/L9f1Fywy8?srsltid=AfmBOopkeCIMPjDdGF...
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