Jump to content
ATX Community

Date of Stepped Up Basis


Randall
 Share

Recommended Posts

A trust receives property upon death of a person (say 5 years ago).  But the trust is revocable.  Then grantor of the trust dies and the trust becomes irrevocable (say current date).  Is the stepped up basis as of the date of the first death (5 years ago) or the date of the 2nd death (current date)?  The revocable trust becomes an irrevocable trust (tax entity) at the date of the 2nd death.  But title to the property was transferred to the trust (revocable) 5 years ago.  Any opinions?  References?

Link to comment
Share on other sites

10 hours ago, DANRVAN said:

What was the relationship between the 1st person to die and the 2nd one five years later?

Mother died.  One son took the property as his share, other siblings got their share.  Son (grantor) put the property in the trust.  Son (grantor) died 5 years later.  Trust sells house.  2 beneficiaries, children of son, grandchildren of 1st deceased.  

My question is regarding stepped up basis.  Son received stepped up basis 5 years ago, which would be basis of property owned by the trust.  So would the trust (grandchildren) receive a stepped up basis again 5 years later because the grantor dies.  Or would the trust retain its cost basis from 5 years ago since the trust is the owner of the property, not the individual who died?  Or would the individual who died be considered owner of the property since it was a grantor trust?

Link to comment
Share on other sites

2 minutes ago, Bart said:

Son's trust does get a stepped up basis five years later.

Do you have any reference on that?  Everything I see refers to date of death but nothing regarding a second stepped up basis when property is owned by a trust.  I was thinking that the trust became the legal owner of the property at the time of the first death.  Then I wondered about it being a grantor trust and perhaps the 2nd stepped up basis.  It would knock out the gain.  I would like some authoritative reference to support this though.

Link to comment
Share on other sites

22 hours ago, Randall said:

A trust receives property upon death of a person (say 5 years ago).  But the trust is revocable.  Then grantor of the trust dies and the trust

By nature of the beast, a revocable trust become irrevocable upon the death of the grantor and therefore included in his estate.  The trust and the grantor are basically the same entity.

Therefore in your case, son inherited property from mom and receives stepped up basis.  Upon his death the trust becomes irrevocable and goes to his estate.  His estate also receives stepped up basis.

13 minutes ago, Randall said:

I would like some authoritative reference to support this though.

Look up the definition and operation of revocable  trust.

 

  • Like 2
  • Thanks 1
Link to comment
Share on other sites

20 minutes ago, DANRVAN said:

By nature of the beast, a revocable trust become irrevocable upon the death of the grantor and therefore included in his estate.  The trust and the grantor are basically the same entity.

Therefore in your case, son inherited property from mom and receives stepped up basis.  Upon his death the trust becomes irrevocable and goes to his estate.  His estate also receives stepped up basis.

Look up the definition and operation of revocable  trust.

 

This is the exact answer.

  • Like 1
Link to comment
Share on other sites

1 hour ago, DANRVAN said:

By nature of the beast, a revocable trust become irrevocable upon the death of the grantor and therefore included in his estate.  The trust and the grantor are basically the same entity.

Therefore in your case, son inherited property from mom and receives stepped up basis.  Upon his death the trust becomes irrevocable and goes to his estate.  His estate also receives stepped up basis.

Look up the definition and operation of revocable  trust.

 

I think IRC 1014 covers this.  Specifically IRC 1014(b)(3) which mentions a trust.  Thanks for pointing in a direction.

 

Link to comment
Share on other sites

One more add on.  If Grantor has the right to revoke, but it has to be unanimous with the two beneficiaries (his two children), does this change his status of sole power to revoke.  And thus eliminate the stepped up basis eligibility on the date of 2nd death (grantor). 

Link to comment
Share on other sites

13 hours ago, Randall said:

but it has to be unanimous with the two beneficiaries (his two children), does this change his status of sole power to revoke

Just curious, is this a real or hypothetical situation?   

Since the grantor did not retain the right to revoke, alter...etc, without consent, then it would not be included in his estate or receive a stepped up in basis.

Link to comment
Share on other sites

7 hours ago, DANRVAN said:

Just curious, is this a real or hypothetical situation?   

Since the grantor did not retain the right to revoke, alter...etc, without consent, then it would not be included in his estate or receive a stepped up in basis.

It's real alright.  Too real.  And it's more weird than mentioned.

  • Like 1
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...