Orange County California

Trust Attorneys


My husband has passed away, and I am the successor Trustee of his irrevocable Trust B (bypass or exemption trust). This last year, Trust B had significant gains from selling assets. My question is–Do I report the capital gains tax on my income tax return or is it reported on the trust tax return?

CEB’s California Trust Administration Section 11:49 provides “In general, when a capital asset is sold or exchanged and gain is realized, the gain is principal and is retained in the trust, and the trust recognizes and pays tax on the gain.”  Thus, generally the irrevocable trust will report the capital gains.  There are rare exceptions depending on the language of the trust and other factors but more often it is the trust that reports this gain.

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