1031 exchange, estate planning trust, step up basis

Dear Steve: I plan on 1031 exchanging into a new property, then put the new property in a revocable estate planning trust.  When I die will my daughter receive a stepped up basis?  If so when does she have a tax obligation?  Sincerely, F

 

Dear F:  As you know, when you 1031x you defer income taxes on the realized gain.  The tax is only recognized upon the subsequent sale of the replacement property without another 1031x.  If you hold your replacement property in a revocable trust then you are treated as the owner of the property.  Upon your death your heirs will receive a stepped up basis in the property which they inherit equal to the FMV date of death.  By working the two tax strategies together you  and your heirs successfully avoid all income tax liability.   Estate taxes are not discussed here.  I hope you will chose us for your 1031 exchange, Sincerely,

Steve Hickox
Attorney / President

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