Can liquidate a trust with 36k in unrealized cap gains and pay no tax?

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scintillator
Posts: 22
Joined: Mon Apr 08, 2019 9:30 pm

Can liquidate a trust with 36k in unrealized cap gains and pay no tax?

Post by scintillator » Tue Oct 08, 2019 8:25 pm

I'm the beneficiary of a trust that's about to be dissolved, and the trust has about 36k in unrealized capital gains. My income this year should be around 15k, all from dividends from stocks or bonds I hold (basically all of which I assume are "qualified"). My understanding is that the 0% bracket for cap gains/dividends is about 39k, and if I apply the standard deduction of 12k, I get about 51k of cap gains/dividends that I can realize this year while not having to pay any federal tax. Is that correct?

My other question is the state issue. The trust has been paying California (where the trustee lives, and where I lived when the trust was formed) state taxes on the distributive gains. I don't live in California--I live in Nevada, where state income tax is zero. If I liquidated the trust holdings, realizing all the gains, and just took a check for the balance, would I be obligated to pay California any taxes?

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MP123
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Joined: Thu Feb 16, 2017 3:32 pm

Re: Can liquidate a trust with 36k in unrealized cap gains and pay no tax?

Post by MP123 » Tue Oct 08, 2019 9:47 pm

If all of your income is LTCG and qualified dividends then you'd be in the zero percent federal tax bracket up to $51,375 for 2019 after factoring in the single standard deduction of $12k. This could go even higher if you made HSA or IRA contributions.

I'm not sure about state specific trust taxation particularly in CA.

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