Tax question: Selling a house

[Mr. Krab]

Getting ready to sell a house that's in a trust from a deceased relative. The Realtor told me that i should expect a 1099 tax form to pay the taxes on the sale of the house. I have been with people that sold a house from a deceased parent before and they didn't have this special tax. Is it because it's in a trust? Is there anyway to get a special deduction to offset the tax? How much does it normally run?

I thought you could inherit up to 200k without any special inheritance tax.


Any Tax People in da house?

[KC Dan]

Just count it out as you put it in...

[alnorth]

I'm not an accountant or a tax guy so this could be dead-ass wrong. Consult with a tax lawyer or tax professional before relying on Chiefsplanet advice, blah blah blah, etc etc legal disclaimer.

A trust is not the same thing as a person who inherited the property. I dont know that the trust can "inherit" or receive a step-up in tax basis, so if the trust sells there could be a "profit". If the trust sells the house, then the trust may have some nasty taxes to pay, but I dont know that for sure. You may need the trust to give title to the beneficiaries, then they sell the house.

[bevischief]

Have you tried Google?

[Buehler445]

DISCLAIMER: I am not a lawyer, accountant, or even a smart guy.

Based on my understanding a trust is a separate legal entity in which the heirs are trustees and then have control over the entity.

My parents told me theirs is set up to avoid taxes.

It also could be that the realtor doesn't know anything about trusts.

My recommendation is to talk to a CPA. Perhaps get legal council to interpret what the trust actually said.
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[Hog's Gone Fishin]

I am a pig farmer , I masturbate livestock for a living. But , I'm not stupid as I probably make more money than 90 % on this board , so listen to what I tell you.

Obama is President.

You're ****ED !!!

[Brock]

The way I understand it, no matter if you just inherited it, the government treats it like long term capital gain. My recommendation? Keep it and rent it out. It's income, and more importantly, business expenses give you the opportunity to **** the government for a change.

[alnorth]

Originally Posted by Brock

The way I understand it, no matter if you just inherited it, the government treats it like long term capital gain. My recommendation? Keep it and rent it out. It's income, and more importantly, business expenses give you the opportunity to **** the government for a change.

Well, I do know that is wrong. Assuming complications like trusts arent involved, if you straight-up inherit a piece of property, stock, almost anything out of probate court, you get a step-up in tax basis. (some exceptions, inherited non-Roth IRA's are still taxable because the contributions were never taxed, and I'm pretty sure inherited annuities are taxed)

In other words, the government treats it as if you "bought" it on the day of death, so future gains are taxed, but the prior gains died with the previous owner and the taxes owed on that if the previous owner would have sold are forever lost to the government.

You dont normally have to worry about estate taxes on inheritances until you get over $3.5M total net worth, or less if the guy who died made lots of huge gifts during his life. (There is a $3.5M exemption to the estate tax, which is cumulatively reduced each year by any gifts made and reported to the IRS over $13,000/year/person)

[Brock]

Originally Posted by alnorth

Well, I do know that is wrong. Assuming complications like trusts arent involved, if you straight-up inherit a piece of property, stock, almost anything out of probate court, you get a step-up in tax basis. (some exceptions, inherited non-Roth IRA's are still taxable because the contributions were never taxed, and I'm pretty sure inherited annuities are taxed)

In other words, the government treats it as if you "bought" it on the day of death, so future gains are taxed, but the prior gains died with the previous owner and the taxes owed on that if the previous owner would have sold are forever lost to the government.

You dont normally have to worry about estate taxes on inheritances until you get over $3.5M, or $2.5M if the guy who died made lots of huge gifts during his life. (There is a $3.5M exemption to the estate tax, which is reduced by any gifts made over $13,000/year/person up to a million, anything over the million is then hit by gift taxes)

So you're saying there will be no capital gains tax on the sale of the house? Gross sale proceeds minus market value on day of death?

[alnorth]

Originally Posted by Brock

So you're saying there will be no capital gains tax on the sale of the house? Gross sale proceeds minus market value on day of death?

If you inherit a house, you get a step-up in tax basis. If you immediately sell, no taxes are owed (federal anyway, no idea on all 50 states) unless it was part of a huge net worth, in which case some estate taxes are owed before the beneficiaries can get any money.

The only thing making this question complicated is the trust, I dont know what happens with that vs a will.

[Brock]

Originally Posted by alnorth

If you inherit a house, you get a step-up in tax basis. If you immediately sell, no taxes are owed (federal anyway, no idea on all 50 states) unless it was part of a huge net worth, in which case some estate taxes are owed before the beneficiaries can get any money.

The only thing making this question complicated is the trust, I dont know what happens with that vs a will.

I see, thanks for the explanation.

[Scorp]

Originally Posted by Hog Farmer

Obama is President.

You're ****ED !!!

WTF? George Bush really did wonders for this country didn't he? He fucked us all and your bashing Obama? Stupidsit shit I have heard on this board ever, and I am not even a democrat.

[Swanman]

Originally Posted by Brock

So you're saying there will be no capital gains tax on the sale of the house? Gross sale proceeds minus market value on day of death?

I am a CPA, but don't do my own taxes, so take that fwiw. Even if there is a gain with the stepped up basis, there are exemptions in place for gains less than a certain amount (I believe in the hundreds of thousands). The only way you don't have an exemption is if you sell x number of houses in a given period.

[googlegoogle]

All sorts of taxes for owning a home and then they get you for selling it.

F-them.

[Hog's Gone Fishin]

Originally Posted by Scorp

WTF? George Bush really did wonders for this country didn't he? He fucked us all and your bashing Obama? Stupidsit shit I have heard on this board ever, and I am not even a democrat.

You'll be paying more in taxes under Obama you dumbass! Where do you think all this money he's spending will come from. The tooth fairy.