Costa Mesa, CA asked in Estate Planning and Real Estate Law for California

Q: When is a house owned by a trust reassessed?

My mother-in-law died in 2014. Her house was owned by a trust for which she was the trustee. The house was then held by the trust as a life trust for two of her children. The life trust ended in January of this year, the house sold in two weeks and the net proceeds are to be distributed to her grandchildren. The ownership did not change till the sale. Is the capital gains basis the fair market value when she died, when she purchased it, when she established the trust, or when the life trust ended? We spoke with four CPA's and got these four different answers.

1 Lawyer Answer
James Edward Berge
James Edward Berge
  • Estate Planning Lawyer
  • San Jose, CA
  • Licensed in California

A: The income tax cost basis of the house would be reset to date of death fair market value when grandma died, not when her kids died, assuming that none of the kids had a general power of appointment over disposition of the property when they died.

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