@djimm100 wrote:
a) deduct costs of repairs and maintenance from the trust?
This scenario really gets tricky because "ownership costs", which are those costs incurred merely by reason of being the owner of property, are generally not deductible just because the property is placed in a trust. In other words, if a hypothetical individual would have incurred the same costs had the property not been held in a trust, the costs are not deductible by the trust.
See Treas. Reg. §1.67-4(b)(2)
@djimm100 wrote:
b) deduct costs of improvements from the trust? If so, in the current year, depreciated over time, or only when the property is sold?
Improvements are not immediately deductible; they are capitalized. However, in this instance, since the property is not actually rented to the beneficiary, the improvements would have to be added to the basis and recovered when the property is sold to an unrelated third party in a fully taxable transaction.
