1041 Other Deductions Allowed for a Trust

[budsara1]

1041 line 15a is "Other deductions (attach schedule).  See instructions for deduction allowable under section 67(e)"

I am completing the 1041 for a trust.  I'm having difficulty interpreting section 67(e) and would appreciate your help identifying what can be deducted on the trust tax return.  My mother passed away last year.  I am in charge of the estate and trust.

I paid funeral expenses (funeral home, church, flowers, pastor, musicians, and memorial celebration).  Are these expenses deductible on line 15a?

I paid a fee to have the house appraised for value on date-of-death.  Is that expense deductible here?

I paid estate tax in my state.  In order to pay the tax, I sold stock that was in the trust.  The brokerage charged commissions and fees on the sales of the stock.  Are those commissions and fees deductible on line 15a?

Are there other common things that can be deducted in the management of a trust or estate?

This should be the first and final 1041 submitted for this trust.

Thanks for your help.

[tagteam]

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@budsara1 wrote:

I paid funeral expenses (funeral home, church, flowers, pastor, musicians, and memorial celebration).  Are these expenses deductible on line 15a?

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I am sorry for your loss. Funeral expenses are not deductible on Form 1041, unfortunately.

The cost for an appraisal would be administrative expense and deductible as such.

Estate tax? Do you mean estate income tax to the state? The commissions and fees charged by the broker are sales expenses and reduce any gain (increase any loss) that is realized on the sale. They would not be deductible on Line 15a.

[tagteam]

There are other deductions, but you should be aware that any expenses that would not be deductible if they were incurred by a hypothetical individual would not be made deductible by virtue of the fact that they are incurred by the trust.

[budsara1]

Thanks for your response, tagteam.

I live in a state that imposes an "Estate Transfer Tax," which is separate from and in addition to the state income tax on the trust income.  In order to pay that estate transfer tax, I sold stock that was in the trust.  So, I was thinking the commissions and fees might be considered an administrative expense since the only reason the stock was sold was to pay the tax on the estate.

Appreciate your feedback.

[tagteam]

No, those fees are incurred in connection with a specific transaction and serve to reduce gain or increase loss on the sale itself.

[tagteam]

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@budsara1 wrote:

I live in a state that imposes an "Estate Transfer Tax,"....

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Was this a real estate transfer tax?

Which state?

Note that estate, inheritance, legacy, succession, and gift taxes are not deductible on Form 1041.

[budsara1]

No, it was not a real estate transfer tax.

The state was Oregon.  The form was OR-706 Oregon Estate Transfer Tax Return.  The estate owed taxes, which the estate paid.  As the fiduciary, I sold stock in the trust to pay that tax.

On another note, I paid property tax on her house that was also in the trust.  Since I as an individual can deduct property tax, I assume the trust can also deduct property tax on line 15a.

Please let me know if you concur.

I paid a lawyer for estate administration fees.  I assume that expense goes on line 14.

I paid a CPA to help with the completion of the OR-706.  I assume that expense also goes on line 14.

What I don't know is if only a portion is deductible under section 67(e).

[tagteam]

Those expenses are deductible on Line 14. 

I personally don't believe you would have to prorate since having the tax return prepared is an obligation of the estate (although the actual amount of tax paid would not be deductible).

[tagteam]

Property taxes would also be deductible on your 1041 if paid by the trust or if you paid the tax and the trust reimbursed you.