Has IRS issued clarification on 67 (e) (1) regarding final estate & trust costs are not misc deductions; therefore can be deducted on beneficiary’s return?

[tagteam]

Below is a screenshot of the other entry I tried. I entered the amount under "Estate tax deduction..." in the Other Deductible Expenses section. 

The correct figure appeared on Line 16 of Schedule A, of course, but then so did the description ("Federal Estate Tax"). 

I did an override of the description only (Trust Expenses). The program complained about that in the final review so the return might have to be paper filed. However, I cannot see where there would be a serious issue with the actual figure on Line 16 since that figured was entered during the Interview and not Forms Mode.

[tagteam]

Anyway, I simply do not see how else this particular expense can be entered given the current software iteration and, considering the enumerated list of expenses to be entered on Line 16 in the instructions, it sure seems doubtful that Intuit will reprogram to accommodate an expense that is not in that list.

[maglib]

wasn't there another option of Other expenses?  I will be doing it tomorrow. If I get it to work, will let you know. It would be nice to say 67(e) expenses now wouldn't it?

[tagteam]

You can write anything you desire when you do the override of **just** the description, so "67(e) Expenses" is one possibility.

There is a screen in that section for "Less common expenses" but entering a description and an amount on that screen gets you absolutely nowhere; it appears as if that is strictly for "state tax use only".

[tagteam]

"Go to the section to enter investment interest expense, it will bring up a window after interest expense..."

When I did that the figure I entered wound up on Line 9 of Schedule A (see screenshot). 

[maglib]

well at least it got deducted....  sadly on wrong line item, should be on Other line 16 I would think.  It's not interest for sure.

[tagteam]

Yes, it is neither correct nor appropriate. Further, you need enough investment income to cover the expense.

[tagteam]

To the best of my knowledge, the following is about as close as they have come to date.

https://www.irs.gov/irb/2018-31_IRB#NOT-2018-61

[maglib]

@tagteam

In TT I believe now ther is a place to enter them....  just somewhat hidden.

Go to the section to enter investment interest expense, it will bring up a window after interest expense to enter other investment expenses.  i have not tested it but, it looks promising.

[maglib]

Finalized:

https://www.irs.gov/pub/irs-pdf/i1041.pdf  "Deductions allowable under section 67(e). Miscellaneous itemized deductions subject to the 2% floor aren’t deductible for tax years 2018 through 2025. However, deductions under section 67(e)(1) continue to be deductible if they are costs that are incurred in connection with the administration of an estate or a non-grantor trust that would not have been incurred if the property were not held in such estate or trust. See Notice 2018-61 for more information. Also see Regulations section 1.67-4 for costs that are commonly or customarily incurred by an individual. "

https://www.law.cornell.edu/cfr/text/26/1.67-4 for reg section 1.67-4

[tagteam]

Correct, except the problem remains that the IRS has not provided an avenue to take the deduction. Rather, the IRS has actually removed the possibility of deducting such costs on Line 16 of Schedule A:


Only the expenses listed next can be deducted on line 16. For more information about each of these expenses, see Pub. 529.

Gambling losses (gambling losses include, but aren't limited to, the cost of non-winning bingo, lottery, and raffle tickets), but only to the extent of gambling winnings reported on Schedule 1 (Form 1040), line 21.

Casualty and theft losses of income-producing property from Form 4684, lines 32 and 38b, or Form 4797, line 18a.

Loss from other activities from Schedule K-1 (Form 1065-B), box 2.

Federal estate tax on income in respect of a decedent.

A deduction for amortizable bond premium (for example, a deduction allowed for a bond premium carryforward or a deduction for amortizable bond premium on bonds acquired before October 23, 1986).

An ordinary loss attributable to a contingent payment debt instrument or an inflation-indexed debt instrument (for example, a Treasury Inflation-Protected Security).

Deduction for repayment of amounts under a claim of right if over $3,000. See Pub. 525 for details.

Certain unrecovered investment in a pension.

Impairment-related work expenses of a disabled person.

[maglib]

impairment expenses still flow through via 2106. K-1's can be fixed in the feed for certian expenses.. the IRS still allows other but TT only allows this if you override... which then means there is no warranty and then means you can't e-file....  so frustrating.

[tagteam]

You have to do an override on Line 16 of Schedule A specifically because TurboTax is following the IRS instructions for Line 16 of Schedule A (which do NOT allow any other expenses than those listed therein).

The point is that the they need to provide more (better) guidance on this entire issue. The Code and Regs are at odds with the IRS instructions and the IRS has not resolved the matter.

[maglib]

the override doesn't work @tagteam  when you do it, it messes up other calculations as I've tried this in the past as I have a sister who has a special needs trust so many of her expenses were not subject to 2% caps as she pays expenses she otherwise would not have had to if it was not a court ordered settlement due to her disability....  TT wouldn't support it.  Now they really need to as many are moving to trusts and it impacts more and more users.

IRS allows the famous OTHER, why does TT not allow it with warnings and sirens?