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Posted by Stuart A. Bronstein on April 12, 2006, 11:09 pm
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> My wife is the trustee for the living trust from the death
> of her sister. My wife's niece and nephew have lived in her
> late sister's home since her death 18 months ago. My wife
> wants to liquidate the house and distribute the proceeds of
> the sale among her sister's children. Will there be a
> taxable event in the form of capital gains as a result of
> the sale? If so, are there any strategies to avoid these
> taxes before the house is sold?
Assuming the sister was the sole owner of the house, its
basis is the value it had on her date of death. So there
would be a capital gain only to the extent it has gone up in
value since then.
In general when someone inherits something he becomes the
legal owner on the date of death, even though he really
can't do anything with it until the formalities are out of
the way.
So if local law and the terms of the tust are cooperative,
the kids would be entitled to an exemption of $250,000 if
they live there for another six months before the place is
sold.
Stu
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