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Old Yesterday, 10:46 PM
 
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Some know I am selling a rental property for my mother. It's in escrow now. She was well when the property was listed. But she quickly ended up in hospice and isn't expected to live more than a month or so. The property, far as I knew, was transferred into a trust a little over two decades ago in 100% ownership by her. Now a deed has surfaced in escrow dated 1984 naming her, myself and my sibling as joint tenants. I never knew she made this deed and recorded it 34 years ago. My sibling never knew about it either. So I am in a quandary. Applying the trust as it reads, if she passes before escrow closes the entire interest would go to us as her sole heirs with a 100% step-up in basis to today's levels. But this deed, if the IRS insists it is a good transfer despite the fact there is no proof we were served with notice of it and which we never knew about--if the IRS says this deed is a good transfer it would put I and my sibling's cost basis at 1985 levels. But if she passes after escrow closes then her 1/3 ownership gets a step-up to current prices while ours stays at the very low 1985 level in which case we pay a very large capital gains tax on our portion, but not hers. Why the trust didn't specify the earlier deed I have no idea. The attorney either goofed big time or my mother instructed him not to indicate the deed, or she just plain forgot about the deed. Anyone have a sense of which direction the IRS will carry this? I have already been turned down by two law firms who aren't interested in pursuing it and about five CPA's who don't want to touch it for fear, I suppose, of opening a can of worms with the IRS.
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Old Yesterday, 10:54 PM
 
137 posts, read 29,072 times
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Quote:
Originally Posted by thrillobyte View Post
Some know I am selling a rental property for my mother. It's in escrow now. She was well when the property was listed. But she quickly ended up in hospice and isn't expected to live more than a month or so. The property, far as I knew, was transferred into a trust a little over two decades ago in 100% ownership by her. Now a deed has surfaced in escrow dated 1984 naming her, myself and my sibling as joint tenants. I never knew she made this deed and recorded it 34 years ago. My sibling never knew about it either. So I am in a quandary. Applying the trust as it reads, if she passes before escrow closes the entire interest would go to us as her sole heirs with a 100% step-up in basis to today's levels. But this deed, if the IRS insists it is a good transfer despite the fact there is no proof we were served with notice of it and which we never knew about--if the IRS says this deed is a good transfer it would put I and my sibling's cost basis at 1985 levels. But if she passes after escrow closes then her 1/3 ownership gets a step-up to current prices while ours stays at the very low 1985 level in which case we pay a very large capital gains tax on our portion, but not hers. Why the trust didn't specify the earlier deed I have no idea. The attorney either goofed big time or my mother instructed him not to indicate the deed, or she just plain forgot about the deed. Anyone have a sense of which direction the IRS will carry this? I have already been turned down by two law firms who aren't interested in pursuing it and about five CPA's who don't want to touch it for fear, I suppose, of opening a can of worms with the IRS.
How does the title company show the vesting on the property? That is probably most of your answer there.
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Old Today, 12:03 AM
 
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Title is vested in the trust. Still there's this wild-card deed.
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Old Today, 08:34 AM
 
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Quote:
Originally Posted by thrillobyte View Post
Title is vested in the trust. Still there's this wild-card deed.
If the title co is showing vesting in the trust then thatís who the owner is and thatís who receives the proceeds.
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Old Today, 09:19 AM
 
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Originally Posted by Spokaneinvestor View Post
If the title co is showing vesting in the trust then thatís who the owner is and thatís who receives the proceeds.

I hope it's that simple. Thanks, Investor.
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Old Today, 11:47 AM
 
Location: Raleigh NC
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you're asking a tax and accounting question in a spot where tax and accounting advice is anecdotal/laymen, when tax and accounting professionals haven't been able/willing to help.

the only good advice (and I think this has come up with you before, or someone w a similar "trust account" issue) ...

GET THE ATTORNEY WHO DID ALL THIS SH!* TO STRAIGHTEN IT OUT.
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Old Today, 11:52 AM
 
137 posts, read 29,072 times
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Quote:
Originally Posted by BoBromhal View Post
you're asking a tax and accounting question in a spot where tax and accounting advice is anecdotal/laymen, when tax and accounting professionals haven't been able/willing to help.

the only good advice (and I think this has come up with you before, or someone w a similar "trust account" issue) ...

GET THE ATTORNEY WHO DID ALL THIS SH!* TO STRAIGHTEN IT OUT.
Presumably title had their in-house counsel look at the chain of title and determined the trust is the current owner. The title examiner discovered the deed and brought it up as either an exception to clear or informational - not sure. If the title company showing the title vested in a trust and is willing to issue title insurance to the buyer without an exception for the other deed, then my position is the trust is the owner.

I strongly doubt that attorneys and CPAís have refused to look at this issue as the OP claims. Probably the OP hasnít consulted anyone ó professionals donít refuse to look at an issue for fear of angering the IRS LOL.
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Old Today, 03:45 PM
 
Location: 5,400 feet
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You need to first discuss the ownership issue with a real estate attorney in your area. How that plays out will determine the tax issue on sale. Inheritance is not a taxable event to heirs and is not yet an IRS concern. If sale produces an amount greater than the tax basis, that creates a taxable event.

If the 1984 deed was properly drafted and properly recorded, that likely established a joint tenancy (and was a gift of 1/3 of the property from your mother to you and your sibling, which I would ignore at this point). As such, the three of you should have signed the deed transferring ownership from the joint tenants to the trust. The fact that the trust doesn't mention the deed is not important as property most often gets transferred into a trust after the trust is signed. However, both the 1984 deed and the the deed to the trust need review.

If the 1984 deed is invalid, the trust owns 100% of the property. If the 1984 deed is valid, he outcome may be that you, your sibling and the trust each own a 1/3 interest. The tax basis of that 1/3 for you and your sibling is 1/3 of the value (cost and improvements) in 1985. The trust 1/3 will have a stepped up basis and that should follow to the recipients. The net sale amount minus the allocated bases will be taxed as a capital gain.
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Old Today, 05:03 PM
 
Location: Haiku
4,992 posts, read 2,809,056 times
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Quote:
Originally Posted by thrillobyte View Post
Title is vested in the trust. Still there's this wild-card deed.
Most states require that the deed be conveyed to the trust, so if the only deed you have names you and siblings as joint tenants, then the trust was never fully completed You need to get the deed conveyed to the trust ASAP. I would talk to a lawyer.
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Old Today, 06:46 PM
 
12,076 posts, read 20,636,229 times
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Quote:
Originally Posted by thrillobyte View Post
Some know I am selling a rental property for my mother. It's in escrow now. She was well when the property was listed. But she quickly ended up in hospice and isn't expected to live more than a month or so. The property, far as I knew, was transferred into a trust a little over two decades ago in 100% ownership by her. Now a deed has surfaced in escrow dated 1984 naming her, myself and my sibling as joint tenants. I never knew she made this deed and recorded it 34 years ago. My sibling never knew about it either. So I am in a quandary. Applying the trust as it reads, if she passes before escrow closes the entire interest would go to us as her sole heirs with a 100% step-up in basis to today's levels. But this deed, if the IRS insists it is a good transfer despite the fact there is no proof we were served with notice of it and which we never knew about--if the IRS says this deed is a good transfer it would put I and my sibling's cost basis at 1985 levels. But if she passes after escrow closes then her 1/3 ownership gets a step-up to current prices while ours stays at the very low 1985 level in which case we pay a very large capital gains tax on our portion, but not hers. Why the trust didn't specify the earlier deed I have no idea. The attorney either goofed big time or my mother instructed him not to indicate the deed, or she just plain forgot about the deed. Anyone have a sense of which direction the IRS will carry this? I have already been turned down by two law firms who aren't interested in pursuing it and about five CPA's who don't want to touch it for fear, I suppose, of opening a can of worms with the IRS.
Itís my understanding itís similar to a will. Letís say the decedent is a crotchety person who changes their will four times a year, on a whim, to cut people out, put people at back in, and cut more people out, and put different people back in. The last will made is the final say. End of conversation.

So ó its a timing matter. Your mother deeded the house in all your names in 1984. The next question is when did she open the trust? If she opened the trust after that deed, and then titled the house to the trust, the trust wins. If she opened the trust in 1982, and put the house in the trust in 1982, and then did the new deed with the joint tenancy in 1984 the joint tenancy supersedes the trust.
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