Capital gains on home sale

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@cewilliams wrote:

Several years ago, we set up a trust with my mother and my sister.  The trust included my mother's house.  She passed away last year.  We are in the process of selling the house now.  Where do we calculate the "value of the house"?  Is it the value when they purchased the house? Is it the value at the time the trust was established? is it the value when she passed away?

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You absolutely need professional (legal and tax) advice and guidance in this situation. Depending upon the terms of the trust, the trust may or may not be irrevocable, and there could be any other considerations.

Generally, however, the trust takes a stepped up basis per Section 1014 of the Internal Revenue Code. In this instance, that would apply to just your mother's ownership interest in the house (e.g., if it were one-half, then one-half of the basis of the house would be stepped up to the fair market value on the date of death).