@aylee98wrote:Hi,
My father passed away in 2013 and he created a family revocable trust for which him and my mother were co trustees. Upon his passing, my mother had to update deeds and the trust to reflect her as sole trustee. We had a valuation (not appraisal) done of the properties held within the revocable trust.
See AlsoTaxation and Sales of Inherited Property Get Beneficial Treatment - Ericksen KrentelCCH AnswerConnect | Wolters KluwerSelling an Inherited House in California: Property Sale Tax & MoreHow to Avoid Paying Taxes on Inherited PropertyMy questions are...
- She didn't file an estate tax return bc the value of the estate was low. was this a mistake?
- She had a valuation done of all the properties within the estate. Is this sufficient to establish cost basis at time of my fathers death?
- Should she be getting appraisals today that record assess the value of these properties from 2013?
My mother is now preparing to sell one of these properties but we don't know the cost basis. We don't want this to negatively impact her capital gains tax.
I think I need to tell you to see a local accountant or attorney. Taking stuff out of the trust to sell it (while leaving other assets protected in the trust) is one tricky issue. Determining the basis of the property that is to be sold is another tricky problem.
In general, if your mother and father lived in a community property state, then her basis on property she co-owned with her husband, is equal to the FMV on the date he died. She received a full stepped-up basis. If they did not live in a community property state, she received a stepped up basis on half the property she inherited, and keeps her original basis on the other half she did not inherit. Her original basis is what she originally paid, even if it was a long time ago (or half of what she paid, if she bought it with her spouse). The county will have records of the original purchase price.
You can add to the basis by the cost of permanent improvements you can prove. It may be reasonable to estimate if you know she made improvements but did not save receipts, but be aware that if she is audited, the IRS does not have to allow any basis that she can't prove.
An estate tax return generally not required if the estate passes to the surviving spouse (and the trust is not part of the estate in any case) but you would have to check with the laws of your state to see if she had any state tax responsibilities.
Whether an informal evaluation would satisfy an auditor will depend on the personality of the individual auditor. If
