Trust options

[gman]

Taxpayer and spouse put land in irrevocable trust. Both spouses recently deceased and childrend interested in options for the property.

Can the property be divided between 5 children, title transferred and basis(original basis to parents) be transferred to each child and then each child be responsible for tax on sale rather than pay the trust rates? Several would be in lower brackets.

Thank you

[Burke]

Much will depend on the trust document which controls the asset. What does it say about disbursement to beneficiaries? A trust sometimes can be broken if all bene's agree, but this is a legal question and will depend on the state in which it is sited, too. I assume the trust allows the land to be sold?

[Roberts]

This is a tax forum and not a legal forum. Tell them to get an attorney.

[gman]

tax aspects of sale

I have the trust document and it states that each shall vote on whether to terminate this trust. So, if they vote to terminate the trust does the land pass to each child with original purchase basis? Then each could do whatever they wish with their share. It also states that the term of trust shall not last greater that ten years after death of last "settlors"(reference to parents).

[appelman]

When did the trust become irrevocable?

If it was irrevocable during the lifetimes of both settlers, your interpretation is correct. If it was a living trust that became irrevocable upon the death of one of the settlers, a common situation, there is likely to be a basis stepup involved.

[Gary2]

For tax purposes, and assuming the intent is to sell all of the real estate now, I don't see why the property would have to be transferred to the beneficiaries first. If the trust is allowed to distribute principal at all, wouldn't it make sense for the trust to deal with the sale (just to keep the sales process simpler), and then distribute the proceeds (and hence taxable income) to the beneficiaries? Or am I wrong in thinking that a capital gain that is paid out, even when attributed to corpus and not required to be paid, is deductible to the trust?