My mother passed away in 2018 and the house was in a revocable trust that my father and mother has set up.
My sister and I are the sucessors and we recently sold the home. We are splitting everything 50-50.
My question is will we need to pay taxes on the money we received from the sale of the home. Again we split the money.
Any help would be appreciated, also it was revocable and the house was in the trust.
Thanks you
I assume your father has also passed, so both of the initial "settlors" (creators) of the Trust are deceased?
Trust taxes are complex. Are there any stock or mutual assets to be distributed? I learned this year that they can offset taxes to the trust when distributed to the heirs, but I didn't really follow what the trust attorney told me.
I do know that if you haven't paid all the expenses of the last illness, the funds from sale of the house must be directed to those expenses.
I'm in a somewhat similar situation. Once the house is sold, and all last illness expenses are extinguished, the funds would be distributed to the heirs, of which I'm one. At that point, I'll be reading the IRS 1041 booklet a few times to make sure that everything is handled properly, but I'll probably also ask my attorney (who handles trust taxation). just to be on the safe side.
This is one of the forms that will be challenging my eyesight and brain:
https://www.irs.gov/forms-pubs/about-form-1041
And that's what I would recommend to you: consult with a trust accountant. I wouldn't take the chance - trust taxation is just so complex.
In general any income is taxed.
If you spent any of your money fixing up the house to sell it you might be able to deduct your expenses though.
But a good tax preparer is your best bet for an accurate answer.
If there is tax due on an inheritance it is normal for the estate to pay them. Not the person receiving the inheritance.
I believe that the current nontaxable inheritance amount is at roughly 11 million dollars for a couple, 5.6 for an individual.
You really should consult with your tax preparer because they have the entire picture.
To me, key is someone needs to file an estate tax return or probate papers to document that the estate owned the property on the date of their date. If they gave it to you while they were still alive, even the day before they died, you are stuck with carryover basis (what they paid for it). I am concerned that the trust was used to avoid probate. Even if an estate tax return not due, you may want to file to document.