If it's getting ready to distribute, the property could be distributed first and the beneficiaries could arrange the sale amongst themselves. That way the beneficiary relinquishing his share pays the tax.

If this is an ongoing trust and one-half of an asset is sold to a beneficiary, generally the trust would pay the tax on the gain. At that point you'd have 50% of the house as an asset and cash or a note receivable equal in value (but not necessarily in basis) to the 50% of the house.

This could be structured as an installment sale to spread out the gain.

The trust agreement could have some provisions that would override the general treatment I've disguised. It may be wise to consult the attorney who drafted the trust.

Mary Kay Foss