Trust Final on Deceased

[S T]

Having a "moment"

Deceased had a Living Trust -changed to the beneficiaries
All happened 2011 and 2012 - no income for those years
Primary asset in trust is the decedent's personal residence - sold in 2013

Get that!

Question - one of the beneficiaries lived in the Residence and she paid the Mortgage, not the Trust/Estate

Who claims the mortgage interest - the trust or the beneficiary?
Who claims the property tax?

Have right now $ 9K profit on sale of Residence - trying to reduce, but these beneficiaries have co-mingled so much - it is hard for me to get out of the "weeds"

Thanks,

Sandy

[Burke]

You have a dilemma. Trust owns house, but did not pay mortgage. So no deduction for interest or taxes. One bene lived in house, but does not own it. So no deduction for him/her either as they are not legally liable for the debt. This should have been handled as a rental, not for profit. Bene pays monthly rent to trust, trust pays mortgage and deducts int/tax properly. Trust cannot deduct any other expenses since a bene is living there.

[DMICPA]

But

Wouldn't the House get a basis step up so I am confused on how there could be a profit on the house sale. After commissions and escrow costs etc.

[Burke]

Yes, but it looks like the bene lived in it for 2 years, so there could have been a profit since the DOD, which I am assuming was in 2011.