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Author: Tiddman Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Re: Trust loss carryover Date: 3/20/2008 7:19 AM
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I can opine on this since I had a similar situation. I'm not a tax expert, but I did hire one to do my taxes :-).

My father had a trust as part of his estate plan, and after his death, some assets were sold out of the trust at a tax loss. This capital loss occurred in the trust since the assets were owned by the trust, not my father, when the sales occurred.

I was informed that this capital loss could offset capital gains within the trust, and be carried forward from year to year. When the trust is liquidated and shut down, unused capital losses can be essentially distributed to the beneficiaries. The trigger event is the termination of the trust -- the beneficiaries don't get the benefit of the capital losses until the trust is liquidated in its final year.

If I understand what you are saying, as an example: If the uncle had purchased some stock for $ 30,000 2 years before he died, and on the date of death it was worth $ 20,000, but was sold 6 months later for $ 15,000 while the estate was being settled, there would be a long term loss carryover that would pass through.

It may matter how the stock was owned, i.e. was it owned by the individual, or the trust. If owned by the trust, was it placed in there before or after death. Also, I assume that the cost basis would be fair market value at the time of death, as opposed to the decedent's cost basis, so a tax loss would only occur if the proceeds were below that basis.

$0.02... perhaps only worth $0.01.
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