Q: Who pays the capital gains on a house sold, the trust or the beneficiaries or both
A: Most commonly, it’s the trust that pays it because the beneficiaries do not own the assets while they are still in the trust. Beneficiaries only get a current ownership interest in an asset when it has been taken out of the trust, all debts of the deceased person are paid in full, and the asset has been handed over to the beneficiary. That’s when they own the asset; not while it’s still sitting in the trust. It’s a common mistake people make thinking that the asset in a trust is owned by a beneficiary simply because they are named in the trust as the person to inherit it. But that person may never inherit a thing if the decedent left a lot of debt and insufficient assets to pay off that debt. On the other hand, if all final bills can be paid off and there’s going to be money/assets left over, then the beneficiary has a chance at inheriting something, depending on what the trust says. Best wishes!
A: If the house was transferred to beneficiaries as the result of death of the owner, there is a step-up in basis and no capital gains would be owed. If capital gains tax applies, it depends on who owned the house at the time of the transfer - if a trust owned the house, then the trust pays but if the house was owned by an individual then the individual pays. If the house was jointly owned, then each owner will have to pay a pro-rata portion of the capital gains tax.
A: Typically, capital gains taxes on the sale of a house are paid by the person who realizes the gain. In the case of a trust, this would depend on the terms of the trust and who is considered the "owner" of the property for tax purposes. If the beneficiaries are deemed to be the owners, they may be responsible for paying the capital gains taxes. If the trust itself is responsible for the taxes, the cost may be paid out of the trust assets. It is best to consult with a tax professional or estate planning attorney to determine the specific tax implications for your situation.
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