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I have property in California that was part of a living trust. I became the trustee. The property is in the process of being sold. There are 4 beneficiaries that will divide the revenue that will be available after settlement of costs involved. The property was appraised at $270,000 sold for $350,000. Will the beneficiaries have to pay a tax on their gift from receiving the property? As the trustee, is there special tax forms that need to be filled out prior before distributing the revenue?
ANSWER
The BIDaWIZ Team's Answer:
The trust would file a return or form 1041 and then issue a K-1 to the beneficiaries detailing the capital gain allocated to them or the sale price less the fair market value at the time of death. The beneficiaries would then report the gain on their individual tax returns.
