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  • 1.  Step up in Basis

    Platinum Most Valuable Member
    Posted 08-11-2023 06:15 PM

    Client created a family trust in 2011.  Cleint passed away in 2022.  Trust owned real estate representing four residential lots which was sold in October 2022, after the grantor of the trust passed away.  Does the trust treat cost basis equal to the sales proceeds.

    If not, please explain.

    Thank you!



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    David Rothfeld
    DAVID J. ROTHFELD, CPA
    Hicksville NY
    516-433-2129
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  • 2.  RE: Step up in Basis

    Platinum Most Valuable Member
    Posted 08-12-2023 08:08 AM

    David, I'm not the best expert for trusts, but my understanding is that if the trust was Revocable, you'd get the step up in basis as the owner held the rights to sell property during their life.  Irrovocable Trusts would not get the step up in basis.

    Steve



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    Stephen MankowskiCPA
    MANKOWSKI ASSOCIATES, CPA, LLC
    steve@mankowski.cpa
    215-682-7366
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  • 3.  RE: Step up in Basis

    Posted 08-13-2023 07:08 PM

    An irrevocable trust could receive a step-up if its property was included in the decedent's gross estate.  This requires an examination of the trust terms and the conduct of its grantor, trustees, and beneficiaries from creation until the grantor's death.  Generally, though, irrevocable trusts with investment real property are created with tax motivations and are designed not to be includible in the grantor's estate, and the basis adjustment under Section 1014 doesn't apply in those cases.



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    Matthew E. Rappaport, Esq., LL.M.
    Vice Managing Partner
    Co-Chair, Taxation Group
    Falcon, Rappaport & Berkman LLP
    (516) 558-3377
    mer@frblaw.com
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The opinions expressed are the views of the author alone and should not be attributed to any other individual or entity and shall not constitute an accounting opinion.