Ed Roberts Jr wrote:

- quote -

It seems to me that this is far more of a legal problem than
a tax problem. Given that the deed was never recorded and
the trust was never formalized, this begs several questions:
Did a sale actually take place? If so, who was the
purchaser? Was the purchaser a trust and/or did the
purchaser transfer the property to a trust? Etc. Until some
or all of these questions are answered, speculating on tax
treatment would be simply that.

In my opinion this issue should be referred to an attorney
in the state(s) where the property was located AND where the
trust was purportedly created. Hopefully these two events
occurred in the SAME state. Otherwise, I suspect that there
could be additional issues to resolve.

MTW

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About 10 years ago X purchased real property from Y (with
cash, not a loan). X asked Y to make the deed out to a trust
for X's children; however, X never drew up the trust nor
recorded the deed. Since then the deed has been misplaced.

Y is willing to write out a new deed, and is flexible as to
whether it should be a trust, or outright to the children.
X's children, now adults, want to sell the property. In any
case, they want to record the true ownership in case Y dies
and his heirs are not as flexible.

What kinds of taxes would be due before the property is
sold? After? What is the best way to structure the
transaction to reduce taxes and distribute their impact
fairly among the parties? I'm looking more for pointers on
what issues need to be addressed, than for specific legal
advice.

If the answer is "see a CPA / EA / tax attorney", one who
practices in the state where the property is located? or the
state where X, Y and most of X's children live?

One possible issue I can think of: X and Y are both getting
on in years, and it is unlikely but conceivable that one of
them might need to enter a nursing home in the next few
years.

Each child's share of the property is worth more than the
annual gift exclusion, but the property plus the probable
value of A's estate at his death will likely be less than
$1M.

Thanks,
Ed

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