When property is transferred from a living (revocable) trust to a beneficiary on the death of the grantor, the beneficiary receives a stepped-up basis. Any appreciation after the grantor’s death is taxable to the beneficiary when he/she sells the property.
Fully deductible interest on up to two residences if acquisition debt secured by a home is $1 million or less, and home equity debt is $100,000 or less.