Exemption on home sale available to trust?


P

phil

My dad set up a trust for 3 of us may years ago, and my
brother's home was purchased and held in that "grantor"
trust to this day- grantor trust since it was technically
our $, but dad said "Im keeping an eye on it- any
objections?!". Dad is trustee. It has appreciated
substantially, and I am wondering if when we sell (when my
brother decides to move) would the 250K exemption be
available to the trust? Or the 500k would be even nicer, but
again, my brother single if that matters- since he isnt
owner....

At this point can we deed it to him personally for 0 or
nominal consideration or perhaps a charge against his other
trust assets, and not have to pay capital gains tax on this
transfer? (Or would that be a fully taxable event in which
the trust would have to pay tax on this "sale' to him
personally?) If we could do either and avoid the tax on
transfer, then he can continue to live in it for two years
and sell it and have profit exemption avail? I assume he
would have to start at the old basis- from when trust bought
it, or else it would be "too good" a plan.....Does this
work? Thanks.
 
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M

Martha Matthews, EA

My dad set up a trust for 3 of us may years ago, and my
brother's home was purchased and held in that "grantor"
trust to this day- grantor trust since it was technically
our $, but dad said "Im keeping an eye on it- any
objections?!". Dad is trustee. It has appreciated
substantially, and I am wondering if when we sell (when my
brother decides to move) would the 250K exemption be
available to the trust? Or the 500k would be even nicer, but
again, my brother single if that matters- since he isnt
owner....
Before you can get a good answer you need to give the trust
agreement to a competent taxpreparer or attorney who are
experienced with trusts. Because it was funded with "your"
money does not necessarily mean it is a grantor trust.

The only way to get the exclusion is for the trust to be a
real grantor trust and the person getting the exclusion is
the grantor. Without seeing the document, just reading your
question, it seems the "grantor" may be your father and you
and your siblings the beneficiaries.

Martha Matthews, EA
 

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