Q: A deed to a property goes into an irrevocable trust. Is the real estate taxable by the government?
Or is the property subject to the tax break the irrevocable trust receives?
A:
Is the real estate taxable by the government? Yes.
Or is the property subject to the tax break the irrevocable trust receives?
It also would receive any tax breaks as well as being taxable.
It's still taxable when the tax assessed is $0.
That's going to depend on how the trust is drafted and what you mean by "tax break".
What tax are we discussing? Income tax, property tax, estate tax, gift tax, tax tax?
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- Colorado
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A: My understanding is that an Irrevocable trust must distribute all income to beneficiaries each year, which makes the trust a pass-through entity. Those beneficiaries pay the taxes on income. However, capital gains are not considered income to irrevocable trusts. Instead, capital gains count as contributions to principle in the tax code. The "estate tax exemption" applies to all property. These are good questions for confirmation by your CPA.
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- Colorado
- (303) 775-1112
- View Profile
- Answered
A: Irrevocable trusts must distribute all income to beneficiaries each year, which makes the trust a pass-through entity. Those beneficiaries pay the taxes on income. However, capital gains are not considered income to irrevocable trusts. Instead, capital gains count as contributions to principle in the tax code. You should confirm this with your CPA before taking any final action on the deed.
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