Taking Title — in a Trust
Many investors purchase investment property in a trust. The trust receives the income and gains the full benefit of all tax deductions, including depreciation. The investor may charge some expenses for property management.
Depending upon the trust and applicable tax laws, the tax basis of the assets may be “stepped up” to the current value upon the death of the original trustor. In the case of income property, this step-up in the tax basis may be significant, generating additional tax savings in addition to current income and depreciation.
Banks have some restrictions on providing mortgage loans for a property to be held in a trust. Some investors purchase the property individually, then immediately transfer the property to the trust after the closing. The investor should check with advisors for tax, legal, and financial questions prior to purchasing property to be held in a trust.