Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Sunday, June 14, 2020

IRS proposes guidance on itemized deductions for estates and trusts

Depositphotos_123786690_l-2015-1200x636The Internal Revenue Service has proposed regulations to offer guidance for estates and trusts clarifying that some deductions of estates and non-grantor trusts are not considered to be miscellaneous itemized deductions. 

The Tax Cuts and Jobs Act of 2017 prohibited individual taxpayers from claiming miscellaneous itemized deductions for any taxable year starting after Dec. 31, 2017, and before Jan. 1, 2026.

The new proposed regulations provide a list of permissible deductions in calculating adjusted gross income and aren’t considered to be miscellaneous itemized deductions. Below is that list:

  • Costs paid or incurred in connection with the administration of the estate or trust which would not have been incurred otherwise;
  • Deductions concerning the personal exemption of an estate or non-grantor trust;
  • Deductions for trusts distributing current income;
  • Deductions for trusts accumulating income.

The proposed regs also clarify how to decide on the character, amount and manner for allocating excess deductions that beneficiaries who receive the property of a terminated estate or non-grantor trust can claim on their individual income tax returns.

See Michael Cohn, IRS proposes guidance on itemized deductions for estates and trusts, Accounting Today, May 7, 2020.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.


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The key word here is "clarify." Turns out existing reg. section 1.642(h)-2 has been wrong all along. Excess deductions on termination are not per se miscellaneous itemized. Therefore the effective date for at least that part of the proposed reg should be retroactive not only to tax years starting after 2017 but to any open year.

Posted by: Russ Willis | Jun 15, 2020 4:26:37 PM

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