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Rental property basis in trust vs. not in trust
Old 04-19-2014, 06:04 AM   #1
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Rental property basis in trust vs. not in trust

I have a question about passing a rental property on to our heirs and the basis for taxes when sold. We have been taking depreciation on a rental property for 12 years and the property is not currently in our family trust. If we died the cost basis would be reset to the current market value and the kids would not have to pay tax on recouped depreciation if they sold it.
If we moved the ownership of the property into our trust, would the cost basis be reset upon our death or would the IRS consider ownership to still be the trust and keep the tax basis the same?

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Old 04-19-2014, 07:15 AM   #2
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some will certainly want to verify esp. for your particular state, etc. Don't know about the depreciation part.

We live in a community property state so property is in our joint A/B trust while we are both alive. At first death, property gets step up in basis and is put into either survivor trust (A) or residuary trust (B) or perhaps gets split between the two. If put into the A trust, it belongs to survivor who has power to dispose of it as he/she wishes so upon the 2nd death, it gets a second stepup.
However, if put into the B trust after the 1st death with the initial stepup,
when the 2nd death occurs, ownership is still with the irrevocable B trust so there is no 2nd stepup in basis.

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Old 04-19-2014, 07:20 AM   #3
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If the trust is included in a decedent's estate the property will acquire a new basis.
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