House in Trust sold
Hi Terry,
Love listening to you on WGN 720 radio!
We recently sold my father in laws house. The house was in a trust. My father in law passed away in 2019 and my brother in law has been living there ever since. My question is: Is there a tax benefit if we purchase a property with those funds? My brother in law said that he has 2 years to purchase property to receive a tax benefit.
Thank you,
Terry Says
Your brother-in-law is wrong. He is thinking of a very old law.
But there are going to be taxes involved on the sale of the house. And the amount depends on the kind of trust it’s in. You’re going to need some sophisticated tax advice.
If it was owned by a trust and he is not the sole beneficiary, he cannot claims $250,000 exemption on the sale since it was not legally his primary residence.
So there will likely be a capital gains tax on sale, which the trust must pay. First you’d have to establish the cost basis. If the trust was created at death, the cost basis would be the valuation at date of death. (Plus any improvements made since then.)
But I don’t know all the details, so I urge you to get specific advice from a CPA.
