Buying & Selling Real Estate Discussion

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Eric V Harding
  • Investor
  • Los Angeles
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Reverse Mortgage - After The Sale

Eric V Harding
  • Investor
  • Los Angeles
Posted Aug 3 2022, 20:46

My mother has moved out of her home and in her final foster care situation. We will handle selling the home for her and repaying the loan with its sale, as she has a year to pay it back before its foreclosed.

We have a living trust and power of attorney, but would like to when its sold, will there be capital gains tax on whats left?

Orange County, California

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Winston Covington
  • Realtor
  • Santa Ana, CA
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Winston Covington
  • Realtor
  • Santa Ana, CA
Replied Aug 3 2022, 21:43

This is a tough situation and you will need the advice of a good CPA.  I’m not a tax specialist but as a Realtor with over 37 years of experience, I can tell you that the Trust will provide you with a step up basis once your Mom passes away. If the house is sold prior to that, there’s a high probability that you Mom will have a tax liability. However; please check with a good CPA to see what exemptions you Mom may qualify for.  Good luck.

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David M.#1 Creative Real Estate Financing Contributor
  • Morris County, NJ
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David M.#1 Creative Real Estate Financing Contributor
  • Morris County, NJ
Replied Aug 3 2022, 21:48

@Eric V Harding

Interesting...  I think you will need to consult a qualified accountant/cpa and potentially attorney...  I think it depends on how the Trust was written. I think Living Trusts are all revocable trusts.  In that case, I think the IRS allows the sec121 exclusion to be taken ($250k a capital gains is excluded from taxation or $500k if married).  There may be additional specific language required in the trust.  But, I think your chances are good the gains, at least $250k, will be tax free.  Good luck.

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Winston Covington
  • Realtor
  • Santa Ana, CA
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Winston Covington
  • Realtor
  • Santa Ana, CA
Replied Aug 3 2022, 21:48
Quote from @Winston Covington:

This is a tough situation and you will need the advice of a good CPA.  I’m not a tax specialist but as a Realtor with over 37 years of experience, I can tell you that the Trust will provide you with a step up basis once your Mom passes away. If the house is sold prior to that, there’s a high probability that you Mom will have a tax liability. However; please check with a good CPA to see what exemptions your Mom may qualify for.  Good luck.