Level 3

Reporting a sale of home.

Forum|Forum|5 years ago
March 19, 2021
2 replies
21 views

This is convoluted but I need to know the best way to report this. My client put 16% of the down payment on her parents home. The trust deed reads the mother, father and daughter as joint tenants. Mother died in 2019 and nothing was ever done to change title. Father died in 2020. House is sold. Seller is listed as my client as successor trustee of the parents trust. Title to the house was never in the trust. My client did not live in the home. My client received two 1099-S - one for 16% of the proceeds to her as the Successor Trustee of the Trust and the balance to her fathers SSN but to her as successor trustee of the trust. Do I report 16% of the purchase price as the basis on my client's return and then 16% of the proceeds (less costs) and use the $250,000 exclusion for a single person - or is she entitled to the exclusion?

This topic has been closed for replies.

qbteachmt

Level 15

There is no exclusion if it wasn't her primary residence.

"EXCLUSION REQUIREMENTS

IRC section 121 allows a taxpayer to exclude up to $250,000 ($500,000 for certain taxpayers who file a joint return) of the gain from the sale (or exchange) of property owned and used as a principal residence for at least two of the five years before the sale"

Where did this Trust wording come from: "one for 16% of the proceeds to her as the Successor Trustee of the Trust"? What about this: "and the balance to her fathers SSN but to her as successor trustee of the trust." "Seller is listed as my client as successor trustee of the parents trust."

Someone gave the title company the info they used.

Are you sure that isn't "of the estate?"

Have you worked through the step up in basis for each death? Maybe there is no gain. Was it sold right away or held onto all year?

Or, there was a trust, but the title was never changed? Which makes it moot, like about 95% of private residential "trust" formations. They form a trust and don't put any property in it; or, it is supposed to be formed upon death, and you don't have that fact?

Don't yell at us; we're volunteers

G

gats1016Author

Level 3

Thank you for the input

sjrcpa

Level 15

Someone did something to change the title to the trust or the sale documents would not list the Seller the way you described.

The more I know the more I don’t know.

BobKamman

Level 15

@sjrcpa

Absolutely right. The OP tells us,

"Seller is listed as my client as successor trustee of the parents trust. Title to the house was never in the trust."

Best place to start would be the escrow agent that handled the transaction. What might have happened is that Mom and Dad put their interest in the house into a trust, but the daughter did not sign off on that. So when the house was sold, the deed and payment showed the seller as "Mary Smith, as Successor Trustee as to 84% and in her individual capacity as to 16%." But does it really matter? She gets stepped-up basis as of her father's date of death anyway.

BobKamman

Level 15

On second thought, maybe she doesn't get stepped-up basis on her 16% because she was no longer a joint tenant. Her parents destroyed it when they put their share into their trust. I would probably just argue "substance over form" and give it to her anyway.

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