Loss on sale of residence in a trust

[Sudhir]

Can a loss on the sale of a residence in a trust be passed on to beneficiary of trust through K-1? Resident was sold by trust a few months after the death of grantor.

[TAXNJ]

See applicable paragraph:

https://pocketsense.com/can-loss-tak...-12000747.html

and

https://www.legacyenhancement.org/blog/2020/november/can-trusts-distribute-losses-/

[Sudhir]

Thank you for the references. Very helpful. Thanks again.

[Sudhir]

Thank you for the references. Very helpful. Thanks again.

[Uncle Sam]

According to TTB P. 21-13 - a loss is deductible if not used personally by a beneficiary.

[Sudhir]

Uncle Sam, Thank you for the TTB reference citation.

[ruthc]

In a separate case, the title to the house was not held by a trust, but rather by the mother's children's as tenants in common, subject to the life estate retained by the mother. After the mother died, the house was sold by the daughters a few months after she died.. If a loss was calculated, would that be deductible by the children? They did not live in the house at all.

[TAXNJ]

In a separate case, the title to the house was not held by a trust, but rather by the mother's children's as tenants in common, subject to the life estate retained by the mother. After the mother died, the house was sold by the daughters a few months after she died.. If a loss was calculated, would that be deductible by the children? They did not live in the house at all.

See Life estates and remainders. TTB 21-27

“Life estates and remainders.
This form of ownership is similar to joint tenancy and, like joint tenancy, is commonly used to avoid Life estates and remainders. This form of ownership is similar to joint tenancy and, like joint tenancy, is commonly used to avoid probating real estate. Life estates and remainders are typically created when the original owner deeds property to family members and includes language on the deed reserving a life estate. The original owner has the right to occupy and receive all income from the property until death. The family members who received the remainder interest have the right to full ownership of the property when the original owner dies. The property passes without probate. If the original owner is still a life tenant at death, the property receives stepped-up basis. The gift of the remainder interest is a completed gift in most states. If property is sold prior to the death of the life tenant, those owning the remainder are entitled to a share of the proceeds. Unlike a joint tenancy, the valuation of the respective shares is not a simple division but calculated based on life expectancy and interest rates. For more information on valuation, see Annuities, life estates, and remainders,page 21-24 .probating real estate. Life estates and remainders are typically created when the original owner deeds property to family members and includes language on the deed reserving a life estate. The original owner has the right to occupy and receive all income from the property until death. The family members who received the remainder interest have the right to full ownership of the property when the original owner dies. The property passes without probate. If the original owner is still a life tenant at death, the property receives stepped-up basis. The gift of the remainder interest is a completed gift in most states. If property is sold prior to the death of the life tenant, those owning the remainder are entitled to a share of the proceeds. Unlike a joint tenancy, the valuation of the respective shares is not a simple division but calculated based on life expectancy and interest rates. For more information on valuation, see Annuities, life estates, and remainders,page 21-24 ......”

[ruthc]

Thanks a lot TAXNJ. I have read all the info for trusts, etc in the TTB. I have also read other articles that state that the loss is not deductible. It was not an investment loss. So I was asking for another opinion. I think I have exhausted my time on it and will carry on. Thanks for this forum. It is very helpful!!!