Selling a house out of a trust to a family member; capital gains tax?

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meneyl
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Joined: Sun Apr 26, 2020 4:31 pm

Selling a house out of a trust to a family member; capital gains tax?

Post by meneyl »

Hello tax gurus! My sister and her husband want to buy a house out of my family trust (my dad is currently the trustee, and my three siblings and I are beneficiaries). My sister is proposing to do rent-to-buy where the rent would go toward the purchase price, rather than a traditional mortgage, which my dad is open to.

However, my dad is concerned there will be a big capital gains tax if he sells and he's worried about the trust taking the hit. (The house has appreciated a good bit in recent years). Would this actually be the case? Thanks for any help for this novice!
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FIREchief
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Re: Selling a house out of a trust to a family member; capital gains tax?

Post by FIREchief »

Who was the grantor of this trust?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Topic Author
meneyl
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Joined: Sun Apr 26, 2020 4:31 pm

Re: Selling a house out of a trust to a family member; capital gains tax?

Post by meneyl »

FIREchief wrote: Sat Nov 21, 2020 7:57 pm Who was the grantor of this trust?
I believe our father set it up.
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FIREchief
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Re: Selling a house out of a trust to a family member; capital gains tax?

Post by FIREchief »

meneyl wrote: Sat Nov 21, 2020 8:09 pm
FIREchief wrote: Sat Nov 21, 2020 7:57 pm Who was the grantor of this trust?
I believe our father set it up.
That sounds like a revocable, living trust. Is that correct?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Gill
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Re: Selling a house out of a trust to a family member; capital gains tax?

Post by Gill »

If this is a revocable living trust the gain on a sale would be taxed to him subject to a $250k exclusion, double if he is married. The trust would be of no effect. This assumes it is his primary residence.

There too to buy idea is not a good one for many reasons, not the least of which is that she is one of several children. She should get a mortgage and but it outright.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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