Client is successor trustee for parent's trust which held ownership of condo in FL. Home sold in 2009..what expenses of the sale are expenses to the trust and deductible against current income? Are expenses to maintain the property, ins taxes until the sale and adjusted at the sale deductible against current income? Thanks John
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That depends on how the property is used. If the parents are alive and occupied the home as their principal residence at the time of sale, it is treated as a personal use asset. Thus, none of the expenses (other than interest and RE taxes that would normally be deductible if owned by an individual) would be deductible.
If, on the other hand, the trust holds the property as investment property and neither the grantor of the trust, or any of the trust beneficiaries, uses the property for personal purposes, then the trust would be allowed to deduct costs to maintain the residence as investment expenses.
A basic tax rule that applies to trusts is that you cannot turn an otherwise personal expense into a tax deduction by creating a trust. The character of the assets held inside a trust (personal, investment, business, capital gain property, ordinary gain property, etc.) is determined by how the grantor(s) and/or beneficiaries use the assets.
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