What to do about a Trust and capital gains?

UPDATED: Feb 7, 2014

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What to do about a Trust and capital gains?

My mother’s house has been in a Trust since her death. I, the successor trustee, am buying the house from the Trust and distributing 1/3 each to my brother and sister. The mortgage loan is being done as a cash out re-fi even though the house is now free and clear. Will the capital gain (between death and sale, about $10,000) be taxable to the Trust or to the beneficiaries?

Asked on February 7, 2014 under Estate Planning, California


Anne Brady / Law Office of Anne Brady

Answered 8 years ago | Contributor

Capital gains of a trust after death are taxable to the trust.  Here, the capital gain on the sale of the house will be taxable to the trust.  If the trust does not have sufficient capital to pay the taxes on the capital gain, then the beneficiaries of the trust must pay the taxes.  The trust should send them K-1 documents.

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