How to handle house sale for trust/estate income tax

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DaveH
DaveH Member Newcomer
edited January 15 in Income

My dad passed away in February 2023 and I am his executor/trustee. His wife passed away in 2021 and he sold their primary residence in Montana in 2022 but he came back to a house here in Virginia that they owned since 1991. It used to be their primary residence but they moved to Montana and lived out there for 15 years only coming back to visit a couple times a year. So now I am handling the sale of his Virginia house and it is set to close this year at the end of December. It's being sold by a trust and I'm selling it as the trustee.

So I guess I need some advice on how to treat the sale for income taxes. Does the cost basis step up at the time of his death which was kind of at the peak of the real estate boom so it might have actually declined in value since then? Do I take the difference between the cost basis at the time of his death and the sale price or the actual proceeds after all the commissions and fees are taken out?

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  • KFine3325
    KFine3325 FreeTaxUSA Agent
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    If the home is held by the trust, then please keep in mind that the sale of the home should be reported on the tax return the trust files, not on your father's tax return.

    That being said, a home inherited upon death typically has a step up basis at the time of death. You may want to consult with a tax attorney that specializes in estates & trusts to make sure you close the estate & correctly report the sale of any assets held by the trust.