Sale of trust home

[arlo]

Have a client who’s father put all of his investments
in a Simple trust in 2003. Trust also included his home.
Father died in 2010. Client is trustee. Trust sold home
In 2015 for 205,000. Trust received 1099-S. House
Never lived in since 2010. Investment Income less
Property taxes and house insurance made up net
Income. Trust paid federal and state income taxes.
Questions: Could house be investment property if
Sold as a loss. ?
How would one come up with the cost of property?
Could the FMV at time of his death be used.
Would this sale of house be excluded from any gain
Since it was his fathers residence?


Thanks for any help.

[Burke]

First, you need to clarify whether this was a Revocable Living Trust or whether it was an Irrevocable Trust at the time it was created. Get the trust document.

[arlo]

sale of trust home

can a simple trust be either one?

[Burke]

Yes it can. How you treat the sale of the home depends on whether it was an RLT or IRT. Not whether it was simple or complex. Who was the trustee while deceased was living? Did deceased have the right to do anything with the funds/house/other assets while he was living? Did he report the income on his 1040? Get the trust document.

[arlo]

Sale of trust home

Thanks burke. When I get this info, if you don't mind, I will get back to you .

[arlo]

Sale of trust home

Burke,
The Simple trust was a revocable living trust.
The trust was established in 2003
All of the owners investment assets plus his
home was put into the trust.
The owner always had the right to do what he
wanted with the assets while he was still living
and the trust always paid the taxes while the owner
was living.
The owner of the trust died in 2010
The wife of the owner died in 2009
My client was related to the wife was the trustee.
The distribution of assets after the death of owner
was to go to theTrustee and his four children.
The trust always paid the taxes rather than
pass them to owner, trustee or children.
The house was sold in 2015. The trustee wants
to sell the remaining investment assets in 2016
I am trying to determine the basis of the sold house
and am thinking the gain will go through the trust.
I am also thinking the basis should be the FMV
as of 2003. I know I am over my head on this one but your
input would be appreciated.

[Burke]

If it was a Revocable Living Trust, then all assets are counted in the estate for Estate Tax purposes, and therefore get a stepped-up basis at the grantor's death. FMV as of DOD in 2010.

[arlo]

Sale of trust home

Thanks a bunch Burke, always nice to have people on this forum with some know how
that can teach the rest of us a few new thing .

[Burke]

Just curious, why did the trustee wait 5 years to sell the house? Was it empty all that time? Did he sell it to a related party?