Sale of personal home by a Trust

[jesdq1]

Can a loss on the sale of a personal house (home of decedent and in the trust) be passed on to the beneficiaries on the K-1s? The FMV of house, selling price, and expenses of sale generates a loss. Or, because the home was the primary residence of the deceased, does the loss stay with the Trust and not passed through to beneficiaries?  

[sjrcpa]

Is this a final trust return?

[jesdq1]

yes

[sjrcpa]

Then everything passes out to the beneficiaries on the K-1s.

[jesdq1]

Thank You.  So, it is not relevant that the house sold was the primary residence of the decedent? 

[sjrcpa]

Sold after death, right?

Did anyone live in it after grantor's death?

Trust was of a kind that the house got a step up to date of death FMV?

[jesdq1]

Sold after death?   Yes

Did anyone live in it after grantors death?  No  

Not sure if I understand the third question. "Trust was of a kind that the house got a step up to date of death FMV? " Are there certain trusts that do not allow a stepped-up cost basis?  It was a revocable trust. Thank You

[sjrcpa]

Yes there are certain trusts and transfers thereto where there is no step up.

Sounds like you have a plain vanilla Revocable/Living/Grantor Trust where the assets get a step up upon the death of the Grantor.

After death, the assets are deemed to be held for investment, in the absence of other facts saying they are not.

[jesdq1]

It is my understanding that irrevocable trusts do not allow the stepped-up basis, I was not aware that other kinds of trusts do not allow a stepped-up basis.  You are correct I have a revocable trust. The fact that the house was the personal residence of the grantor...does that have any effect on the stepped-up basis? Thank You    

[sjrcpa · Accepted solution]

No it does not.

[jesdq1]

Thank you for your help 

[sjrcpa]

You're welcome.

[fwcurley]

What if the house was sold to one of the beneficiaries? Can he and/or the other related beneficiaries claim  the loss? 

[BobKamman]

Maybe.  The answer would rely heavily on "facts and circumstances."  First question, but not the last, would be whether the beneficiary had been living there already.  

[fwcurley]

Yes, he was living there with his mother, the owner of the trust, until she passed. His siblings did not live there. 

[BobKamman]

I would find it difficult to claim that a loss was caused by an arm's-length transaction.