dcaro1[at]hvc.rr.com wrote:

- quote -

If it's a grantor trust as the OP states, it is ignored for
tax purposes.

Stu

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This is really not all that complicated, merely silly.
Properly drafted, the trust should fall under the separate
share rule and be treated as three trusts for tax purpose.

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"Phil" <thinkofanamefast[at]aol.com> wrote:

- quote -

What you are doing is much to complicated to be answered
here, and will depend heavily on exactly what the facts are
and how the transaction is structured.

It seems to me that, if it really is a grantor trust, it
would be treated as if you sold your third to them. So only
one-third of the interest would be deductible, and only your
one-third of the interest would be taxable.

However to the extent they pay less than full market value,
one-third of that might be a taxable gift.

Stu

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"Phil" <thinkofanamefast[at]aol.com> wrote:

- quote -

who funded the trust - you and your siblings, or your dad?

either way, it seems that your brother and sister are living
rent free in houses paid for with 1/3 of your money. What
benefit are you getting each day with 1/3 of each of your
siblings' money? And now they want you to just take back
your 1/3 of the money with no appreciation? I don't get it.

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It is a Grantor trust- as mentioned- our own money which we
put into the trust, and is under the trusteeship of my dad.
Provides certain benefits...similar to family invesment
partnership.

As for real estate acumen- my brother and sister chose these
homes years ago...and they are living "rent free" as is
anyone who pays all cash for their own home, though legal
ownership is by the trust, as mentioned.

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"Phil" <thinkofanamefast[at]aol.com> wrote:

- quote -

I don't think you would be receiving more than intended by
the trust. What "acumen" is required to live (rent free?)
in a house as it appreciates? It sounds like your brother
and sister have a sweet deal.

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My brother, sister and I have a grantor trust with dad as
trustee. My brother and sister live in homes owned by the
trust- but that are understood by us to be "theirs",
including increase in values- that have shot up in value
over last few years, creating a headache on eventual
distribution of trust. This is because on the trust ledger
the homes were listed at purchase price, but at distribution
someday the trust requires 1/3 of assets to be distributedto
each of us, which is unfair to them since their own real
estate "acumen" would benefit me- since I own my house
outside of trust. In other words I would get way more than
intended due to this trust wording..

If we were to deed these respective houses - which are
mortgage free- from the trust to my brother and sister
(remember that they are 1/3 owners of trust so somewhat
deeding to themselves) at some price between original
purchase and current value, and then the trust takes back a
recorded mortgage on the homes for full price (to prevent
possibility of them mortgaging their new free and clear
properties- long story- not a trust issue) would the ongoing
monthly interest they pay to trust on mortgage be
deductible? They have each lived in their homes for 15
years, yet they would technically just be "purchasing" them
now, so is it "acquisition indebtedness" considering they
are buying from themselves to a 33% extent? If it isnt
deductible to them, (yet would obviously be interest income
to the trust), this would be worst of both
worlds....creating a nondeductible debt to them with taxable
interest to trust).

Amounts are way higher than 100K refinance allowance, and
this is in Fl.

We would pay doc stamps on transacton and obviously record
the new deeds, and they would pay actual interest monthly to
the trust- although they would then get some of that back in
their regular trust distribution....

We also know there might be issue regarding gains on these
homes coming due when transaction done, gains would be to
trust since the trust owns them- any chance the 250/500k
exemption applies to trusts, or should we just keep the deed
price/profit as low as plausible since no exemption to trust
on gains on these transactions?.

Any opinions regarding deductibility and gains issue or
other concerns appreciated.

(Yes we have an attorney for this trust, but wanted an
opinion and suggestions prior to contacting her).

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