Trust capital gain calculation/recapture

Forum|Forum|11 months ago
April 21, 2025
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I'm curious. If a simple trust has no income or a loss would it have to pay any capital gains on sale of property that year? What about depreciation recapture?

Thank you!

Hi Palms

The short answer is YES.

Capital gains are usually considered to be corpus and remain within the trust so, in the case of a simple trust (one that distributes only income, not gains, the trust is responsible for paying tax on those gains along with any recapture (Section 1250 gain).

Farmgirl123Author

Thank you. This would be 1245 property sale of an easement. Why would a trust ever distribute capital gains (if they could) if it were a simple trust with no income. If no income there would be no capital gains tax to the trust, correct? And there would be no reason to even think about an option to distribute them to the beneficiary?

Hi Palms

A simple trust does not distribute corpus. If it does, then it's a complex trust and a complex trust may or may not distribute capital gains depending on the trust language and state law.