Cost Basis for the Real Properties sold that remained in Trust

[taxguessingguy]

Hello,

Not quite sure if I’m doing this right.

The trustee sold some real estate (raw land & residential house) properties 2 years after the decedent’s death.

The agreement says the proceeds should remain in the trust and be equally divided to his children. Proceeds from the sale were still sitting in Trust’s bank account waiting for distribution.

To get the basis of the property, I'm using the acquisition cost plus capital improvements less depreciation.

Would like some sort of clarity. Should this qualify for a step-up basis at the time of death? Fingers crossed, this would lower my capital gains tax.

The gross estate is less than $3 million. 1041 returns were never filed. 

Would love to hear from y’all, big thanks!

[sjrcpa]

Was it a revocable trust when the real estate was put into it?

FYI - it is not a revocable trust now. The grantor/decedent can't revoke it after their death.

[taxguessingguy]

Just edited my post, deleted the Revocable info, lol.

Would love to know your thoughts on this.

[sjrcpa]

Still need to know:

"Was it a revocable trust when the real estate was put into it?"

You mentioned depreciation. Was this a rental property? Sounds like 1041s need to filed for the period(s) from date of death to present.

[taxguessingguy]

Hi, Oh yes it was a Revocable Trust.

Properties sold were not Rental Properties. 

The depreciation I mentioned was for the residential house sold.  Cost plus improvements less depreciation to get the adjusted basis.

I'm wondering if this would qualify for a step-up basis? 

These properties were sold with the intention of distributing the proceeds to his 5 children equally. 

[michele]

Hmm

I don't know why you are using depreciation. You don't see that unless it is a rental property.

[taxguessingguy]

OMG, I'm at my wit's end, lol. 

Shouldn't I deduct the Accumulated Depreciation to get the adjusted basis?

Sorry, I said Depreciation, it should have been Accumulated Depreciation.

[michele]

There is not depreciation a personal residence

[sjrcpa]

Yes you deduct accumulated depreciation to get adjusted basis. But we can't figure out why it was being depreciated.

[qbteachmt]

"OMG, I'm at my wit's end, lol."

Who lived in that house, and how does that person relate to the Trust, to that benefactor, to the facts and circumstances?

[TAXOH]

Since now you're saying it's accumulated depreciation is the accumulated depreciation you're talking about on a rental or personal residence?

[taxguessingguy]

Ok, thanks. So there shouldn't be any depreciation to this since it's a personal residence of the decedent, correct?

Another important question is, Should these properties receive a step-up basis?

The agreement mentioned only that the proceeds from the sale should be divided equally among the beneficiaries. 

many thanks!

[michele · Accepted solution]

Yes there is typically a step up in basis if all the correct information is known and falls within those guidelines. I hope you have the closing statement and not just figures that they provided.

*****It concerns me that you were going the depreciation route for what appears to be a personal residence. I do not mean this as being mean or condescending but if you do not understand trusts and how items in the trust work I think you should be passing this return on to someone else to prepare or if you work for a firm have someone review it and go over it with you. You would be do your clients a disservice otherwise.

[TAXOH]

Short answer because now you know we don't keep hassling you trying to make you think your stupid.  We're not.  All anyone is trying to do is give you the correct answer.  And here are the answers to your questions:

The answers to your questions, ARE correct if your wording is based on the correct answer.  Now all you need to do is read the Correct, No, and Yes and quite reading because now you understand and you can move on and get to your next project. 

Correct, but only if the trust was irrevocable at first, and you're intentionally changing your answer, because originally you told it was revocable.  If I'm incorrect, that is not the correct answer and I would need you to rephrase that question because the Correct answer would be would now be Incorrect that I just answered.

No, but the answer is Yes if you worded you're question wrong and for example you meant to say it was a mixture of personal and rental that was sold last year and the trust has not closing out.

Yes, as long as I'm not assuming that you didn't change the wording in your question from yes to no.

Sorry, I didn't mean to make this long, but I don't you to think that you're stupid because most of us were actually trying to help.

Hope you understand everything I just said and don't think I'm still trying to not answer you.  Thanks for eventually telling everyone Thanks finally.

[qbteachmt]

"Should these properties"

Plural? Was there more than one?

Let's understand that Personal Residence means the person lived in it, or at least still owned it while in a care home or facility. Beyond that, "residential property" and "personal residence" are not synonyms.

[taxguessingguy]

newbie in the tax firm here. hoping to get an answer and at the same time get a respectful vibe from this community.

[qbteachmt]

What is this: "newbie in the tax firm here. hoping to get an answer and at the same time get a respectful vibe from this community."

You can't be guessing and look at the help you got. Look at the specificity of the Questions. That matters to your answer. Everything matters. Everyone here has been trying to be helpful. There has been no disrespect. We have used very specific language to draw out the same from you.

What you should do is Thank everyone for being so detailed in helping. And it doesn't hurt to provide more details, when they are asked for. Because it matters.