Hi,
A friend has a revocable living trust. She would like to sell an option to buy a 50% interest in her house, to be executed at the time of her death.
The option would be to purchase 50% of the property for $600,000 with an option payment of $340,000 . If the option is not exercised the trust will give a non-interest bearing note for the option money, to be paid upon the sale of the house.
The questions concerns capital gains tax.
1. Will the trust be liable for any capital gains tax on the option or fair market value?
2. Does the beneficiary need to sell her half interest in the property to avoid capital gains tax?
3. Could the trust retain it's half interest and sell at a later date without paying the tax?
A friend has a revocable living trust. She would like to sell an option to buy a 50% interest in her house, to be executed at the time of her death.
The option would be to purchase 50% of the property for $600,000 with an option payment of $340,000 . If the option is not exercised the trust will give a non-interest bearing note for the option money, to be paid upon the sale of the house.
The questions concerns capital gains tax.
1. Will the trust be liable for any capital gains tax on the option or fair market value?
2. Does the beneficiary need to sell her half interest in the property to avoid capital gains tax?
3. Could the trust retain it's half interest and sell at a later date without paying the tax?