Will Gain on Sale of Home in Revocable Trust be Short-Term or Long-Term?

 In Real Estate, Revocable Trusts

Photo by Clarisse Meyer on Unsplash


I enjoyed your book very much, and last October 2020, I set up a revocable trust and transferred a 2nd vacation home located in Massachusetts into the trust. However, I recently received an unsolicited offer to purchase the property that would result in a substantial capital gain liability. Would the capital gain be considered short-term due to the transfer to the trust in October, or would it still be considered long-term since I have owned the property since 1999?


I’m glad you liked the book.

The good news, in addition to the offer to purchase your property, is that the capital gain will be treated as long-term. For tax purposes, you’re still considered the owner of the property even though title is in the revocable trust. So there was no change of ownership that would subject the sale to short-term capital gains tax rates.

This is likely to result in substantial savings, since short-term capital gains are taxed like normal income at normal income tax rates up to 37% depending on your income tax bracket and long-term capital gain is taxed at more favorable rates, ranging from 0% to 20%. These are the federal rates. You may have additional state income taxes on the gain.


Related Articles:

How are Capital Gains in Life Estate Affected by Improvements?

What Happens to Capital Gain when Joint Owner of Life Estate Dies?

Will Property in an Irrevocable Trust with a Power of Appointment Receive a Step-Up in Basis?

Leave a Comment

Start typing and press Enter to search