InstantForum.NET v4.1.4California Society of CPAshttp://forums.calcpa.org/forums@calcpa.orgSat, 20 Mar 2010 21:50:40 GMT20http://forums.calcpa.org/Topic817-2-1.aspxMother sets up a living trust, then dies, leaving her house to her children, X, Y &amp; Z. There is no debt on the property at any time. X is the successor trustee. Z has lived with mother for the past 35 years and continues to live alone in the residence after mother's death. The house remains in mother's trust for 5 years (while unrelated disputes between X, Y &amp; Z were being settled), and then sold.The proceeds are distributed equally between X, Y &amp; Z. There is total gain of (using stepped up basis) of $150K. The trustee issues K-1's to each beneficiary reporting their respective share of the gain.</P><P>Z wants to claim the Sec 121 exclusion for gain on sale of principal residence becasue he lived in the residence for 2 of the past 5 years. He is arguing that even though he is not on title that his beneficial ownership of 1/3rd of the residence entitles him to receive the exclusion.</P><P>Rev Rul 85-45 indicates that a sole beneficiary is treated as the owner and would therefore qualify for the Sec 121 exclusion, but it does not address a split-ownership scenario. What do you think?</P><P>Bob Abelson, CPA</P><P>Torrance, CAFri, 11 Sep 2009 13:42:24 GMTcpabob