Randall Posted June 5, 2017 Report Share Posted June 5, 2017 Grantor trust had rental real estate deeded in trust name. Grantor dies. Children to receive property. If property is sold by trust, would they lose stepped up basis? Would property need to be transferred to children first to receive stepped up basis? Then sold by children. Quote Link to comment Share on other sites More sharing options...
Randall Posted June 5, 2017 Author Report Share Posted June 5, 2017 I was looking at Reg 1.1014-2 (2) and still wasn't sure it answers my question. Quote Link to comment Share on other sites More sharing options...
SaraEA Posted June 6, 2017 Report Share Posted June 6, 2017 Most likely the most relevant section of the reg is " (2) Without regard to the date of the decedent's death, property transferred by the decedent during his lifetime in trust to pay the income for life to or on the order or direction of the decedent, with the right reserved to the decedent at all times before his death to revoke the trust." In other words, if the grantor explicitly had the right to the rental income and could change or revoke the trust at any time, beneficiaries get step up. You have to read the trust document. Quote Link to comment Share on other sites More sharing options...
Randall Posted June 6, 2017 Author Report Share Posted June 6, 2017 13 hours ago, SaraEA said: Most likely the most relevant section of the reg is " (2) Without regard to the date of the decedent's death, property transferred by the decedent during his lifetime in trust to pay the income for life to or on the order or direction of the decedent, with the right reserved to the decedent at all times before his death to revoke the trust." In other words, if the grantor explicitly had the right to the rental income and could change or revoke the trust at any time, beneficiaries get step up. You have to read the trust document. Yes, beneficiaries get stepped up basis. But does property have to transfer out of trust to beneficiaries to get that stepped up basis? Attorney is wondering if the trust can sell the property, then distribute the money to beneficiaries. I'm wondering if trust sells property, property does not transfer because trust already owns the property. So would the trust itself get stepped up basis without the property being transferred. Quote Link to comment Share on other sites More sharing options...
SaraEA Posted June 7, 2017 Report Share Posted June 7, 2017 You're overthinking this. Yes, the trust can sell the property, purchase date is "inherit" so automatic long-term, stepped up basis. The only difference is that if the trust is going to sell, the expenses to manage the property (electric, water, mowing, etc) will not be deductible because they are for the convenience of the beneficiaries. Quote Link to comment Share on other sites More sharing options...
Randall Posted June 7, 2017 Author Report Share Posted June 7, 2017 Thanks for replies. I was coming to this opinion too. Quote Link to comment Share on other sites More sharing options...
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