FWIW, I asked Google Gemini this question, "when can a cash basis estate deduct expenses advanced by the executor personally that are reimbursed years later when probate closes?" The answer is below and I concur.
For a cash basis estate, an expense advanced by an executor and reimbursed years later is deductible in the year the estate actually pays for it. The cash basis accounting method mandates that expenses are deductible when they are paid, not when they are incurred.
Key IRS guidance
- Deduction timing: A cash basis estate deducts expenses in the tax year they are actually paid. This means that even if the executor paid for an expense years ago, the estate can only take the deduction in the year it reimburses the executor.
- Documentation is crucial: The executor should meticulously track all advanced expenses. Proper documentation, including dates, amounts, and purposes, is necessary to justify the reimbursement and subsequent deduction.
