Tax Obligations when selling a house gained through a living trust

[jstarconcept]

What is the name of your state (only U.S. law)? New York
We inherited a house through a living trust. The house was purchased in 1974 for approximately 70,000 the house is worth 850,000. What kind of tax burden are we facing if we decide to sell?

 

[FlyingRon]

I presume you received this property because the trust grantor died and the trustee deeded to you at that time (or close to it). If so, it depends on when the grantor passed. If they died before the end of 2009, then you got the basis stepped up to the value at the time of the grantor's death. If they died in 2010, you get whatever basis they had. This was probably the purchase price plus any capitol improvements made over the life of the property.

If you are using the house as your principal residence, if you hold it for at least 24 months as such, each owner can get $250,000 of that excluded.

 

[tranquility]

The answer is, it depends.

If the death was not in 2010 and it was inherited because of a death of a person through the trust, you get a basis which was the FMV at the time of death (or alternate valuation date). [Basic step-up in basis.]

If the death was in 2010, it depends on the election of the trustee/executor. There is a carryover basis adjustment if an unlimited estate tax exclusion was chosen (and you must ask them for the allocated amount to house carryover), *OR* a step-up in basis if the $5 million exclusion was elected.