Great aunt died in 2018, left irrevocable trust with stocks - was there a step-up in basis?

When it comes to step-up in basis for assets in an irrevocable trust, it depends on the specific terms of the trust and how it was structured. Generally speaking, assets in an irrevocable trust that your great-aunt created don't receive a step-up in basis upon her death because they're no longer considered part of her estate for tax purposes. However, there are exceptions. If the trust was structured as a "grantor trust" for income tax purposes (which you mentioned it was), the tax treatment can be different. Also, if your great-aunt retained certain powers over the trust, the assets might still be included in her estate for estate tax purposes, which could potentially result in a step-up. The best way to determine this for sure would be to have a tax professional or estate attorney review the trust documents and circumstances. They can tell you definitively whether the basis was stepped up and what your tax implications would be if you liquidate now.

Hey there, I had a really similar situation with my uncle's trust last year. I was also worried about the tax implications and was getting conflicting advice from different sources. I ended up using https://taxr.ai and it was super helpful! You just upload the trust documents and they analyze everything to give you a clear answer about the basis treatment and potential tax implications. They explained exactly how the step-up rules applied to my situation with the irrevocable trust and even provided documentation I could share with my accountant. Their system is designed specifically for these complex trust and inheritance tax scenarios.

I want to follow up about my experience with taxr.ai since I decided to try it after seeing this thread. I'm honestly surprised how helpful it was. I've been dealing with a family trust situation for months and getting nowhere with my regular accountant. The service analyzed our trust documents and provided specific answers about basis treatment that my accountant had been unsure about. It confirmed that in our case (which was similar to yours), we did NOT get a step-up in basis, but it also identified a planning opportunity that would minimize our tax burden when liquidating. Definitely worth checking out if you're struggling with trust tax questions like this.

Since you're trying to figure out the proper tax treatment, you might want to consider talking directly with the IRS to get an official answer. I spent weeks trying to get through to them about a similar trust question last year. After endless busy signals and disconnections, I found this service called https://claimyr.com that got me through to an actual IRS agent in about 15 minutes. They have this system that monitors the IRS phone lines and calls you when they can get you through. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS specialist I spoke with confirmed exactly how the basis rules applied to my trust situation and I was able to get the official answer documented.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was desperate to talk to someone at the IRS about my mother's trust situation. The service actually worked exactly as described. I got a call back in about 25 minutes and was connected directly to an IRS representative who specialized in trust taxation. I didn't have to navigate all those frustrating phone menus or listen to hold music for hours. The agent confirmed that in my case (similar to yours with an irrevocable grantor trust), there was NO step-up in basis upon death. This saved me from making a costly mistake on my tax return. Totally worth it for the clarity alone.

One thing to consider - the original basis of the telecom stocks from her parents might actually be better than you think. If her parents held these stocks for decades, the basis might be really low, which would mean a larger capital loss if you sell now. Make sure you have documentation of when the stocks were originally purchased and for how much. If you don't have that info, the brokerage holding the trust assets might be able to help, or you might need to make a reasonable estimate based on available information.

My stepdad was in a similar situation and he just decided to liquidate everything without checking the basis issues first. Ended up owing way more in taxes than expected because there was no step-up and he had to use the original basis from like 40 years ago. Don't make that mistake! Get a proper analysis before you sell anything. Either use one of the services mentioned above or talk to a CPA who specializes in trust taxation. The rules around irrevocable grantor trusts are really specific and depend on how the trust was structured.

Another option to consider if the stocks have declined in value and you're concerned about taxes - you could distribute the stocks to the trust beneficiaries first, then they could sell them individually. Depending on the beneficiaries' tax situations, this might provide better overall tax treatment, especially if any of them are in lower tax brackets. But this would depend entirely on the terms of the trust and whether distributions of stock (rather than cash) are permitted. Worth discussing with your trust attorney if that's an option.