Qualified Personal Residence Trust - Income Tax Aspects of Residence Trusts

Income Tax Aspects of Residence Trusts

A residence trust (PRT or QPRT) will remain a grantor trust during the grantor’s retained term. Grantor status is important, because it will allow the grantor to take mortgage interest and property tax deductions, and will also avail the grantor of the Code Section 121 gain exclusion.

Following the expiration of the residence term, the grantor status of the trust usually ceases, unless the trust is drafted in a manner to make the trust intentionally grantor following the expiration of the term. This may be advantageous if the trust holds a vacation home and the grantor wishes to deduct mortgage interest and expenses associated with that home.

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